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First of all, I realize that when traveling to another state for employment it is commonplace to owe taxes in that state for the work performed+sourced in that state.

Example: you work/live in Pennsylvania but travel to do work on-site at a facility in California two months. California is entitled to collect income tax on your annual income * 2months/12months per California tax law.

My question pertains to alternate situation where the trips are much shorter and thus the fractional time spent in transit becomes significant.

Example: Live in Colorado but fly to California every single week on Tuesdays and returning on Thursdays. Working from Colorado Mondays and Fridays.

It is clear that 2/5 of the time is spent working in Colorado (Monday/Friday). Furthermore, 1/5 of the time (Wednesdays) is spent wholly in California. On Tuesdays and Thursdays, some work is performed in Colorado and some work is performed in California. But, a significant amount of time is spent in transit (e.g. 50%).

Is there a precedent set as to which state taxes are owned during a transit day? In this particular case, it could amount to a difference in taxes of thousands of dollars annually.

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3 Answers 3

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Just a guess here, and maybe it's under a wrong assumption:

Since the travel time is only related to work done in California, the travel expense and your paid work time spent in travel would be taxable in California.

I would not count the travel time income/expenses with regard to taxes in your state of residence.

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It’s a good question. To my knowledge, there is no legal precedent for this specific circumstance, so I’ll do my best to share my professional opinion on the topic.

  1. I assume you are speaking from the perspective of an employee? If so, many employers enact their own clear line of when your work becomes taxable in another state. Check with your HR/Legal/Accounting team for their opinion and input on how best to withhold. My personal approach would be to log the hours you work while you are physically located in California. Flight time would be Colorado work time (as you are a resident, and for international flights, the time you work in the air is attributable to US income tax, as a US citizen).

  2. If you are a business owner, this may be more complicated. While, as an employee, it’s more straightforward to say “where did I perform the work,” California (along with many other states) will require you to apportion & allocate your business income based on rules that aren’t as straightforward as “how many days did I perform work while being physically located in California?”

In Minnesota, for example where I am located, even if I moved out of state (became a nonresident), I have to apportion some of my business income to clients that are Minnesota residents. Depending on certain thresholds, I may need to pay MN income tax on that income. Apportionment and allocation is a fairly common practice amongst states that levy income taxes.

All this to say, if #1 is your situation, talk with your HR/Legal/Accounting team. My professional judgment says you may only have 1.5 days / week of work in California.

If #2 is your situation, you’ve got a little more work to do than just determining when you were physically present in California doing work.

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In addition to prior answers, here's some overall information about residency and earnings in multi-state situations.

Basically: in completely depends on the specific states involved. Each state defines residency and each state specifies how their tax statutes apply to people who are full residents, part-time residents, and non-residents and who earn money in their state.

Your tax professional based on the states involved can be enormously helpful!

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