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Question

Is some or all of any business income generated from my Wyoming business qualify as New York source income while I'm physically present in NY?

Background

I run an IT consulting firm (LLC with S-Corp Election) with offices and two employees in Wyoming and am a resident of Wyoming. I visit NY for 4 months in the summer and work from home (computer at the kitchen table). I receive a Salary (W2 wages) as well as business income. A portion of my time is billable.

My understanding is that the W2 wages are taxable in NY for the entirety of the period I'm visiting, but I'm not clear as to whether my business income generated during that qualifies as New York source income (and hence is taxable) since I don't have an office there. I've reviewed the instructions from the New York website, but am having trouble applying it to my scenario.

Business activities

As a nonresident sole proprietor or partnership, you carry on a business, trade, profession, or occupation within New York State if you (or your business):

  • occupy, have, maintain, or operate an office, shop, store, warehouse, factory, agency, or other place in New York State where the affairs of the business are systematically and regularly carried on; or
  • perform a series of acts or transactions in NewYork State with regularity and continuity for livelihood or profit, as distinguished from isolated or incidental transactions.

Disclaimer

I fully intend to review this with a CPA/EA, but am hoping to get a general sense of how things work before I start having to pay someone by the hour.

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4 months working from your kitchen doesn't sound like an isolated or incidental transaction. So I think that yes, that income would be taxable by NYS (and NYC/Yonkers if the kitchen is in these cities).

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As a nonresident sole proprietor or partnership

You are not a sole proprietor or a member of a legal partnership. You are an employee for a corporation.

Does the nature of your work require you to be present in New York regularly? If you are in New York for personal reasons, you are simply telecommuting. You must pay taxes personally for your W-2 income, but your business entity never moved from Wyoming. If this were not true, companies would have to pay corporate income tax to every state in which they have a telecommuter.

For example, I live in Florida but telecommute to a company in Michigan. Does my employer pay Florida business tax? Of course not.

Your business would only owe New York if the nature of the business requires a consistent and regular business presence in New York, such as maintaining an office for a portion of every year so clients could see you.

  • "Does my employer pay Florida business tax? Of course not" - are you sure about that? I am not. – littleadv Apr 28 '13 at 21:16
  • Yes, I am sure about that. – Jesse Apr 29 '13 at 12:17
  • Then your employer may be breaking the law. Here's an example of a FL tax that your MI employer is probably supposed to be paying: dor.myflorida.com/dor/taxes/reemployment.html#liable – littleadv Apr 29 '13 at 13:56
  • Florida does not have the authority to make laws on other states. My employer has no business location in Florida, nor does it offer a service in Florida. If Florida had a personal income tax I would be liable for that. But my employer has no ties to Florida, and its entire business is outside the law-making scope of this state. When Florida makes a law that impacts "all residents" or "all businesses," it inherently can only impact FL residents and FL businesses. FL has no power to impose a penalty for non-compliance of its laws to a nonresident business. – Jesse Apr 29 '13 at 18:37
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    I think you don't understand how laws work. If your business has employees in a State, your business must pay payroll taxes to that State. By hiring an employee from Florida, your business chooses to adhere to FL laws. I guess you're your own employee, right? You were trying to avoid exactly that... Well, guess what... Doesn't really work. Sooner or later - they'll get to you. You're lucky you're playing games with FL, not CA where I live. CA FTB is much more aggressive. – littleadv Apr 29 '13 at 18:40

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