If I do business in one state but live in another, where do I pay my state taxes?

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If I do business in one state but live in another, where do I pay my state taxes?

Business in MA; live in PA.

Asked on March 14, 2011 under Business Law, Pennsylvania

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

Where you pay taxes is a case-by-case decision, because it depends on the exact nature and quality of your ties to each state; you should speak with a tax attorney and/or CPA to discuss your situation. That said, as a general matter, you will pay state income tax on your own earnings in your state of primary residence (where you live at least 1/2 the time). If your business is not a pass through tax entity (e.g. not a sole proprietorship, LLC with pass through tax treatment, or a subchapter S corporation; for example, it is instead a C-corp or LLC with non-pass-through treatment), then the business would pay its income tax in the state in which it has the strongest locus or connection--where it has most of its operations--whcih would probably be the state you do business in. That would also be the state where you'd likely have to pay any sales tax or other business-related taxes. Obviously, property tax is paid based on where the property is.


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