I worked remotely for a CA company during Jan 2023- May 2023, Do I need to pay CA state tax for my 7 days vacation in CA?

[User123120]

I worked remotely for a CA company during Jan 2023- May 2023, and lived in another state whole year. I had a business trip to this company in CA for 3 days, and a vacation to CA for 7 days during this period.

1. I understand that I need to pay CA state tax for 3 days business trip in CA, but do I pay CA state tax for vacation in CA?
2. How do I get the amount for the question "How much did you earn in California?"
3. For the number of days mentioned above, I counted the number of nights I stayed in CA, including weekends nights, even I didn't work during weekends, is this correct? Should I exclude weekends nights?
4. I had other business trips to CA in the rest of 2023 during which my work location has been changed to my home state on my payroll, so I don't need to provide these trips infos on CA state return, right?

Thanks!

[Vanessa A]

1. I understand that I need to pay CA state tax for 3 days business trip in CA, but do I pay CA state tax for vacation in CA?  Yes, any days spent working IN CA would be income taxable to CA.  So if your business trip/vacation were all together, then the days you actually worked would be taxable.  If you were on vacation and not working, then those days would not be counted for anything.
2. How do I get the amount for the question "How much did you earn in California?"  The amount you earned in CA would be calculated by taking your daily pay multiplied by the number of days you worked in CA.  If you are salary, then you would divide your total salary for the year by the total number of days you worked during the year and then multiply that by the number of days you actually performed work in CA, even if your employer did not list CA as your work location. 
3. For the number of days mentioned above, I counted the number of nights I stayed in CA, including weekends nights, even I didn't work during weekends, is this correct? Should I exclude weekends nights? You would only count the actual DAYS you worked.  You would not count weekends or days you did not work. 
4. I had other business trips to CA in the rest of 2023 during which my work location has been changed to my home state on my payroll, so I don't need to provide these trips infos on CA state return, right? This does NOT change the taxability of the income.  If you were physically present performing a service (business trip) in the state of CA, whether or not your employer withheld taxes for CA or what they indicated your work location to be, you would be liable for taxes in CA.

However, depending on how much you earned, you may not have to file a CA return at all.  As they do have deductions and exemptions that may cause you to have $0 CA wages.  The best thing to do is walk through the CA return to see if you actually need to file or not.  

[User123120]

Thank you for your replies!

If my company is NOT a CA company, it just has a CA branch, and I worked in another state. My payroll location was at this CA branch before May, but changed to my current state after May. And I had a few short business trips to this CA branch before and after May. Do I need to pay CA income tax for my trips to this CA branch after May? Thank you for your help!

[AmyC]

You will not be double taxed on the same state income, that is illegal since 2015. One state will give a credit for tax paid to the other state. Who gives the credit depends on the states and their agreement. If you would like to reply with the other state, we can share more information.

The  2023 Instructions for Schedule CA (540NR) states:

California nonresident amounts – Enter the total amount of profits or losses (including losses allowed from passive activities) from all businesses sourced to California while a nonresident of California. California uses a mandatory market assignment method and single-sales factor apportionment to apportion business income to California. A nonresident may have California sourced income or apportionable business income if receiving income from intangibles or services from California sources.

If, as a nonresident, you derived income from a business, trade, or profession conducted partly within California and partly outside California, only income from the part conducted within California is considered California source income that you must report in column E. If there is any business relationship between the parts within and outside California (flow of goods, etc.), apportion the gross income or loss from the entire business. To determine the portion of income or loss from businesses engaged in multistate activities that you must report, use the apportionment formula described in Schedule R, Apportionment and Allocation of Income.

[User123120]

Thank you for your reply! I am still confused about if I worked for a non-CA company as a W2 salary employee, I just had a a few short business trips to CA, does this also count as CA source income?  My current state doesn't have income tax. Thank you!

[AmyC]

 If you earned income while in CA, it is taxable income. If you didn't earn income from CA, it isn't taxable. The state laws are constantly changing and CA rules are as listed. If you received income from working in CA, then it would be CA source income. However, if you received the money regardless and the trip was just a business trip, then it would not be CA source income. Since I don't know the details of your work, I don't know if you went to CA and sold widgets or close a million dollar deal vs stopping in to check on operations, I can't say definitely taxable without knowing more. I bet you do at this point!

[User123120]

Thank you for the clarification! I received the same salary income no matter where I worked and no matter what I did in the CA business trips. So the salary paid when I was in the CA trips was not CA sourced after May since after then my payroll location was in my current state.

• So I don't need to report my CA trips after May in my tax return since they are irrelevant, right?
• And I don't need to file the CA state tax for 2024 even I may have some more CA trips this year, right?
• But I still need to pay the CA state income tax for my CA trips before May 2003 since before then my payroll location was in CA, right?
• I also had a business trip to NY after May, does NY has the same tax rule for short business trips to NY?

Thank You!

[Vanessa A]

So I don't need to report my CA trips after May in my tax return since they are irrelevant, right?  No.  It does not matter where the company you worked for was located.  It DOES matter if you physically performed work in the state of CA.  So, if your company headquarters moved to KY and you went to work in CA for 25 days when the headquarters were in CA, then you would need to file a CA nonresident return. 

And I don't need to file the CA state tax for 2024 even I may have some more CA trips this year, right? No, that is incorrect.  If you are physically present in the state of CA, you DO need to file a nonresident return claiming the income that you earned while physically present.  Since you are salary, it would be the salary divided by the total number of days you work in a year multiplied by the number of days you worked in CA. 

But I still need to pay the CA state income tax for my CA trips before May 2003 since before then my payroll location was in CA, right? Yes, you need to pay tax on the income both BEFORE AND AFTER the payroll location moved.

I also had a business trip to NY after May, does NY has the same tax rule for short business trips to NY? Absolutely ANY day you were physically present working in NY, regardless of where the payroll department was located, you will need to include on a Nonresident NY return.

This is true of all states that have a state income tax.  If you are physically present in that state to work, you have to file a nonresident return if you earned more than the filing threshold for that particular state.   Not all states have a minimum.  

[User123120]

Thank you @Vanessa A . Your reply seems different from @AmyC. So in your example, if my company headquarter is in KY all the time, and I had business trips in CA about 15 days in total (before and after May), and I am on salary, no special extra income for the activity in CA, I still need to pay CA state tax for the ratio 15/365 of my total income (inside and outside CA)? 

[Vanessa A · Accepted solution]

As @AmyC said, what do you actually do when you are in CA?  Are you meeting with clients or are you just meeting a coworker for lunch planning when to meet a client?  Are you going to the CA site to work?  Are you making money for your employer while you are there? Why are you going to CA?

Here are the CA rules

"As a nonresident, you pay tax on your taxable income from California sources.

Sourced income includes, but is not limited to:

• Services performed in California
• Rent from real property located in California
• The sale or transfer of real California property
• Income from a California business, trade or profession"

If you are there just to meet with coworkers, but you do not actually make any money for your company while you are there, then you would not be "working" in CA.  However, if you are meeting with clients, setting up deals, servicing components, etc, this would be considered CA source income and you would need to file a CA Nonresident return.

"Service" means a commodity consisting of activities engaged in by a person for another person for consideration. The term "service" does not include activities performed by a person who is not in a regular trade or business offering its services to the public, and does not include services rendered to another member of the taxpayer's combined reporting group as defined in Regulation section 25106.5(b)(3). Cal. Code Regs. Tit. 18, § 25136-2 - Sales Factor. Sales Other than Sales of Tangible Personal Prope...

[User123120]

Thank you @Vanessa A  for further explanations!

The term 'Service' is really confusing. I am not a sales/marketing/professional service person. I went to CA/NY/other states for my company internal meetings, team bonding activities, trainings, and between those activities, I did my normal work, working on some research projects for my companies. None of those were client/deals/contract involved. So I actually didn't have any 'Services performed in CA', and no CA and other states income tax liabilities, right?

Thank you for your help!

[Vanessa A]

Correct.  If you did not have services performed in CA and you were not producing income, but instead just training and "bonding" and would have received the same pay whether you went or not (you're salary so you didn't get paid for attending), you would not have any CA state income tax liability.  

[User123120]

@Vanessa A Thank you very much! I just want to confirm again that my CA sourced income should be zero even for my trips (same kind of activities: company internal meeting/team bonding/training/my normal daily research work) before May when my payroll location was in CA, right?

[Vanessa A]

Yes.  The payroll location does not matter.  YOUR location and YOUR activity are all that matter.  Think of it like this.  A plumber does not work from where he gets paid.  He works in multiple homes or commercial buildings.  If he is an employee, his company headquarters could be anywhere.  He would not need to pay taxes where his company headquarters are, even if he goes to visit the headquarters for a meeting with his boss for an evaluation, because he is not doing anything to make money and not providing any services.  

You are being taxed as an individual, so how/what/why you provide is mostly what matters.  

[User123120]

Thank you very much! I really appreciate your help!