Minding the details that matter most
What’s the state of your state taxes?
You’ve traveled across the
country, products are displayed in the back of the
room and you’re set for a
great presentation. Just then, a man
wearing a button-down shirt asks if
you’re the speaker. He’s from the
state Department of Revenue, noticed
you’re from out of state and asks,
“How are you planning to pay your
state taxes here?”
If you work in another state, most
of you know you’ll probably owe state
income tax there. For just one day of
work? And what about sales tax on our
back-of-room products? The answer to
both is usually yes.
In 1990, several states began taxing
high-paid professional athletes each
time they played games in their state.
Most states have expanded this to
include other high-paid performers,
including speakers, who may or may
not, you argue, be “highly paid.”
Although each state is different,
here are some general highlights.
State Income Tax
Seven states do not have state income
tax: Alaska, Florida, Nevada, South
Dakota, Texas, Washington and
Wyoming. Everywhere else (including
many cities), you’ll be taxed.
Depending on your income in each
state and each state’s tax laws, you may
or may not owe taxes, but you’ll have
to file a tax return to determine that.
On the plus side, paying out-of-state
taxes doesn’t always mean paying more
taxes—just more paperwork. Speak in
10 states, file 10 state tax returns.
For example, last year, you received
$150,000 from speaking; $135,000
speaking in your home state and
$15,000 speaking in state No. 2.
One of many ways to determine net
profit between states is the percent-of-revenue method: $15,000 divided by
$150,000, or 10 percent of your total
revenue came from state No. 2. If your
total net profit was $100,000, then
the net profit from state No. 2 is
10 percent of that, or $10,000.
You prepare your state No. 2 tax
return, where state income tax is
5 percent, and owe $500 tax on the
$10,000 net profit. The home state
tax is $5,000 on your full $100,000,
but you deduct the $500 taxes paid to
state No. 2; the net due home state is
$4,500. No additional tax, except for
those of us in non-tax states.
If your business is a corporation,
partnership or LLC, expect to file
a business tax return plus your individual return. Out-of-state corporations
usually must register and often pay
an annual fee ($800 in California).
Sales Tax
Generally, if you have a physical presence in a state, you must pay sales tax
collected on products sold there.
Again, not more tax, just more paperwork. “Physical presence” doesn’t
mean an office, just speaking there is
enough. And subsequent sales to customers in that state, even by mail,
would be subject to sales tax.
What should you do? Use a qualified
accountant who knows (or will learn)
the other state’s tax laws. A certified
public accountant (CPA) is conferred
by each state’s Board of Accountancy
and an enrolled agent (EA) is conferred
by the Internal Revenue Service.
Avoiding out-of-state taxes by staying
“under the radar” can result in costly
penalties. What’s a legitimate way to
avoid these taxes? Many states don’t
tax webinars (yet). But if you love
doing it live, there’s always Alaska—
no state income tax or sales tax!
William “Bill” Rieben, EA, has more than
33 years experience as a tax accountant
serving individuals and small businesses.
Bill speaks, writes and counsels on income
taxes, technology and growing your small
business by doing what you love. He’s a
proud member of NSA
and NSA/Northwest.
Contact him at
888-365-2471 or
bill@billrieben.com.
