Transportation Nexus

[Golden Rocket]

Company in Tennessee starts Truck Driving operation. Customer's terminal is just outside of Atlanta, GA. Six drivers are hired for hauling in various states.

Drivers are employees and are from TN, SC, GA, FL.

Here is the issue. TN and FL have no state income tax, and some of the drivers live in those states. The customer is in GA. A Tennessee driver drives mostly in TN and to a lesser extent in other states (not necessarily GA). The Florida driver picks up loads in Waycross GA (extreme southern GA), and other than that drives exclusively in Florida.

The TN and FL drivers do not think they should pay state income tax.

Opinions?

[Gretel]

I had the same issue recently between two states of doing business. Each state have their different rules for withholding and UE is another issue. And you also deal with the income tax side of allocations if the operation is not such that the drivers just drive through a state.

The main issue was were most of the work was done and were the trucks were parked overnight to determine the main place of business. There are other factors to consider. In most cases it is true that withholding is in resident state only but you want to confirm with each of the states.

[Gary2]

Take a look at 49 USC § 14503. I'm no expert, but I think the employees are only taxed in their state of residence, so the TN and FL drivers may be right. Check carefully with each state to be sure they haven't found loopholes in the federal law.

On the other hand, the company will likely have to file income tax returns and pay taxes in all the states where it's doing business.

[ChEAr$]

Take a look at 49 USC § 14503. I'm no expert, but I think the employees are only taxed in their state of residence, so the TN and FL drivers may be right. Check carefully with each state to be sure they haven't found loopholes in the federal law.

On the other hand, the company will likely have to file income tax returns and pay taxes in all the states where it's doing business.

Confirmed. Authority is the famous "Amtrak" act back in the 1980's I think. In short, transportation workers are taxed only in their state of residence.

[Gretel]

What you are saying is that there is no difference if a company works in 2 states with pickup and drop off in either or both states, or if this is an interstate trucking business, where truck just pass through a state? (as far as withholding taxes are concerned)

[ChEAr$]

What you are saying is that there is no difference if a company works in 2 states with pickup and drop off in either or both states, or if this is an interstate trucking business, where truck just pass through a state? (as far as withholding taxes are concerned)

Yep.

Around here, for example, Alabama residents working for those Tennessee trucking outfits (as employee naturally) wind up owing Alabama a bunch since those companies have no nexus in Alabama and do not withhold state income tax.

Haven't seen one in a while come to think about it.

But the year after the Amtrak act, I lost a client, Alabama resident, who worked out of the terminal in Macon, GA, about 100 miles away. I thought that Macon was his tax home but it wasn't.