State taxable?

[Drizzle]

Nature of work in response to Jainen's query

Jainen,

The nature of the work done by my client business is service of telecommunications equipment. This may be installation of new equipment or repair or upgrade of existing equipment. The Canadian firm has contracts with many different companies throughout the US and internationally. As I mentioned, the Canadian firm hires other firms to handle parts of the work from time to time. My client's company is one of those firms hired by the Canadian company.

He may work in one place for a week or for three months. That's what I meant by my earlier comment about his moving all over the US and internationally to service the Canadian company's contract. I was getting confused by Calfornia language with regard to the "source" of the payments being determinative. My thought was that Calfornia's rules might be the tightest (other than NY), so I was trying to follow their language.

[BOB W]

Ok....

.... does your client work in states other than WA? If yes, he needs to file (allocated) Corp returns in those states. And he needs to be register with those state(s) as a foreign corp.

[jainen]

correct way to report

>>He may work in one place for a week or for three months<<

The only correct way to report these earnings is by filing a non-resident return in every state he works in. This should not surprise your client any more than the fact that he must comply with different building codes and other state and local laws in the various jurisdictions.

[Drizzle]

Lots of returns....Multistate madness...

Okay, then, I guess the answer is that he has to somehow keep track of where the revenues of the corp are derived, and file a foreign corp return in each of those states.

In addition he would need to file non resident individual returns for each of those states. Presumably he could also be liable to withhold state income tax for each state on the paychecks his corp issued during the year, based on place of earning.

Sheesh. Is this the simplest/cheapest way to handle this? He's just a small business guy with total revenues under 120K/yr.

Drizzle

[BOB W]

Well,

He could do what happens lots of times, and forget about the other states. Not that that is correct, but appearently the cost of preparation and taxes paid will exceed his profits in those other states. That, not valid option, should be the choice of the client. As long as the client understands the risk.

New Jersey is well known for its aggressive stance on non-resident non-filers, other states have no clue what is going on in their state.

It's a tuff call, but it has to be the client's, if that ends up being an option..