If I’m considering setting up an LLC in a state different then my state of residence, would I pay state tax to both states?

My business is strictly online, so I do have the freedom to choose where to set it up. How is the state of taxation determined?

Asked on August 6, 2015 under Business Law, New Jersey

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 5 years ago | Contributor

1) You may legally form an LLC wherever you want--even if you're bricks-and-mortar.

2) Taxation is a complex question, especially because you have both sales tax and income tax. You really need to consult with a tax professional in detail--a CPA or a tax lawyer.

The above said, the short answer is, you pay sales tax in the state of the sale, and income tax in the state(s) where you have a sufficient presence (e.g. your office, even if that's your home, too) to establish a link or nexus.

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 5 years ago | Contributor

1) You may legally form an LLC wherever you want--even if you're bricks-and-mortar.

2) Taxation is a complex question, especially because you have both sales tax and income tax. You really need to consult with a tax professional in detail--a CPA or a tax lawyer.

The above said, the short answer is, you pay sales tax in the state of the sale, and income tax in the state(s) where you have a sufficient presence (e.g. your office, even if that's your home, too) to establish a link or nexus.


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