I recently started working for a firm HQ in New Orleans; however I live in San Antonio and work in the Texas branch office. While I sometimes travel to the New Orleans office for a few days at a time, most of my time is in Texas.

I noticed in my last paystub withholding for LA state income tax. Is this right or a mistake? This is only my second paycheck from them and the first one didn't have any. Pay is biweekly.

Yeah, I'm not sure if LA has a minimum threshold, but you'll likely have to pay state income taxes there.

It's basically proportional to the percentage of the work year you work in a non-resident state. If you record time and location on a daily basis, your employer will likely pro-rate the state income withholding.

I've been in management consulting since '95 and we started paying non-resident state income taxes in the early 2000s.

Is that withheld from employees are does the company foot that bill? (Should be the company imo)

Policy decision by the company.

In my world, the employee is responsible. Comes with the territory.

Just curious, as I'm in consulting also but environmental consulting.

We get a job in LA, and I send my work crew out to do the work. As field techs they make bottom dollar in the grand scheme of things, we don't increase our prices because we're going to LA, I also wouldn't expect them to eat the state tax requirement.


Is this different that your experience?

I'm just curious.

Every state hands it differently

Technically the employee has to deal with the income in the other jurisdiction. The employer has a withholding requirement, and some gross up income to cover it for the employee. OP's employer probably did it correctly and OP will now have to decide whether to file a LA return for 2023.

Some states have been very aggressive lately with employers not tracking and reporting/withholding on the income.

Mistake. It's based on state where you work

New Mexico is the same way, from what I recall.

So I went from being a manager to a business owner over the past year.

We always had to denote if we were working in NM, TX, LA, etc. Our office was based in Texas, company based in UT.

I never had any state income taxes withheld from my checks, regardless of where field work was conducted, but we entered our time with special codes to denote what and where we were working.

As this year is coming to an end, I obviously need to talk to our tax advisor about this!

Appreciate the input,

OP, Not sure how LA law is set up. But I've dealt with this issue for most of my 45 year career (in the Northeast). If your income is from an LA sourced job, then you will owe income tax to LA, even if you hardly spent any time there. I have never been a resident of NY, but since my job was there, I've paid the state a crap ton of income tax over the years. There are some offset rules for when you are working out of state, but (at least according to my accountant) they never let you get totally off the hook.

northeastag said:

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OP, Not sure how LA law is set up. But I've dealt with this issue for most of my 45 year career (in the Northeast). If your income is from an LA sourced job, then you will owe income tax to LA, even if you hardly spent any time there. I have never been a resident of NY, but since my job was there, I've paid the state a crap ton of income tax over the years. There are some offset rules for when you are working out of state, but (at least according to my accountant) they never let you get totally off the hook.

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I don't think this is accurate and it's a different situation than the OP. The OP works for a company with a HQ in Louisiana, but he is based out of the Texas office, and only goes to Louisiana for work for a few days here and there. He shouldn't have to pay LA taxes since he is based out of the Texas office.

It's like saying Chevron employees in Houston will have to pay CA taxes since their HQ is in CA. Same with Houston Hess employees and NY taxes. I've worked for a few companies with HQ's in CA and never had to pay CA taxes.

DeLaHonta said:

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Petrino1 said:

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The OP works for a company with a HQ in Louisiana, but he is based out of the Texas office, and only goes to Louisiana for work for a few days here and there. He shouldn't have to pay LA taxes since he is based out of the Texas office.

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This is not remotely accurate. If you travel to another state to work, then you are subject to their nonresident income taxes. It has zero bearing on where the company HQ is or where you're based out of (with few exceptions like the convenience of employer rule).

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It isn't where the HQ is (did I actually say that?). It depends on whether or not the person is an employee of the LA legal entity. Most multinationals have about a billion subs (which you never even think about), and employees in different states and counties will be employees of the most relevant local subsidiary. In this is the case here, then yes, the employee will not owe taxes to LA. If, however, the worker is directly employed by the LA entity, then they will have to pay taxes on at least some of their income to LA.

How do I know this? Because after 9/11, my company briefly (for about 5 years) created a NJ sub for its NJ employees. When we worked out of NJ we only had to pay taxes to NY for those days in which we were in NY. When they got rid of it, we went back to paying NY taxes.

But hey, this is all way too complicated for me, and I'll admit I might have it all wrong! It's why I used an accountant. My rec to OP as well.

A good summary from this article:

Regardless of whether you're a part-year resident or a nonresident in the state where you are working, you will probably need to complete an apportionment schedule if you have income in more than one state. This form can usually be found in the state's part-year or nonresident income tax return. You use the schedule to "apportion" how much of your income is taxable in each state.

• Part-year residents not only pay tax on income earned from work performed in the state, but also pay tax on all other income received while residing in the state.
• Nonresidents generally only pay tax on income they earned from work performed in the state, and on income received from other sources within the state.

Bottom line is if you earn income in a non-resident state with a state income tax, you likely owe state income tax.

OnlyForNow said:

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Just curious, as I'm in consulting also but environmental consulting.

We get a job in LA, and I send my work crew out to do the work. As field techs they make bottom dollar in the grand scheme of things, we don't increase our prices because we're going to LA, I also wouldn't expect them to eat the state tax requirement.


Is this different that your experience?

I'm just curious.

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The employer would be responsible for withholding state income taxes, depositing those withheld taxes with the state, paying state unemployment taxes with the state agency, filing quarterly payroll reports with the state, and filing W-2 forms with the state (all based on the activity within that state only). Also, the employer would need to file a state income tax return. The employees would need to file a state income tax return based on their state earnings as reflected on the W-2 they get from their employer.

northeastag said:

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It isn't where the HQ is (did I actually say that?). It depends on whether or not the person is an employee of the LA legal entity. Most multinationals have about a billion subs (which you never even think about), and employees in different states and counties will be employees of the most relevant local subsidiary. In this is the case here, then yes, the employee will not owe taxes to LA. If, however, the worker is directly employed by the LA entity, then they will have to pay taxes on at least some of their income to LA.

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Again, this is not remotely accurate. Other than the few states with convenience of employer rules, nonresident income tax has absolutely zero to do with which entity pays you. It has everything to do with where you are working. You can be employed by an LA legal entity, work exclusively in TX, and not pay a dime to LA.

In all likelihood, you will also be taxed at the rate of your TOTAL income, across all states. Then it will be proportionally reduced to what was earned in that particular state.

If you make $10k in Louisiana and $90k in Texas. Louisiana return will tax you at rate of people that earn $100k in Louisiana, not $10k.

That rate will then be applied to your $10k income.

DeLaHonta said:

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northeastag said:

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It isn't where the HQ is (did I actually say that?). It depends on whether or not the person is an employee of the LA legal entity. Most multinationals have about a billion subs (which you never even think about), and employees in different states and counties will be employees of the most relevant local subsidiary. In this is the case here, then yes, the employee will not owe taxes to LA. If, however, the worker is directly employed by the LA entity, then they will have to pay taxes on at least some of their income to LA.

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Again, this is not remotely accurate. Other than the few states with convenience of employer rules, nonresident income tax has absolutely zero to do with which entity pays you. It has everything to do with where you are working. You can be employed by an LA legal entity, work exclusively in TX, and not pay a dime to LA.

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Sorry, but it was absolutely accurate for those states with the Convenience of Employer rule, which is exactly what I described. I have no idea whether or not LA has that rule, but I'd check with my accountant and not rely on the wisdom of a bunch of online posters if I were the OP.

MyMamaSaid said:

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Generally speaking, if you earn income in a non-resident state with a state income tax, you likely owe state income tax.

I'm sure there are exceptions, but states need revenue and they get it by assessing and collecting taxes. I've personally never gotten away with earning income in any state with an income tax and not paying income tax.

YMMV

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So based on this post, if I work for a company in Texas 320 days out of the year, and traveled to California for 3 days to attend work meetings, I would owe California state taxes for those 3 days I was there for work meetings?

I understand why posters would think that way, but I've never seen it done in reality. I've traveled to many states with income tax (CA, NY, GA, ND, LA) to attend random work meetings or whatever, while working/living in Texas, and never had to pay a dime in state taxes for those states. Maybe I got lucky, but this was for several large companies with huge accounting/tax/payroll teams.

Either way, OP should probably clarify with the company's payroll/HR team.

I found this article helpful: Link

Some states start on the first day you're there. Some start after a period of residency - ie California is after 183 days.

Seems like there are a lot of instances that companies probably never consider that you'd technically owe taxes if you were following the state tax code. I'm sure many times, nothing is reported.

Example, you travel to a week of training in Colorado. Technically you're getting paid for working there. But there's really no way for Colorado to know..

northeastag said:

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Sorry, but it was absolutely accurate for those states with the Convenience of Employer rule, which is exactly what I described. I have no idea whether or not LA has that rule, but I'd check with my accountant and not rely on the wisdom of a bunch of online posters if I were the OP.

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It's weird that, in none of your posts did you mention the convenience of employer rule, which is a tiny minority of states. In fact, I was the only one in this entire thread who mentioned the convenience of employer rule as an exception to the vast majority of states that don't have that rule.

LA does not have the convenience of employer rule, so it's a moot point here.

Thanks. Do you know when the clock starts in California, for example? 183 was just what I found when researching, but I could have made a mistake. I don't really know and find this topic fascinating (and potentially frustrating).

Even if going just for an in-person meeting or a factory acceptance visit, etc, this seems like it could get out of hand. If I had to basically lose some of my pay because of business travel for a company caused me to pay extra taxes, I'd be pretty ticked.

Called HR and payroll.

They said it was a mistake.

Thanks for all the responses.

It's usually an amount of income, not a number of days. California's website says the threshold was $19k of CA income for a single person in 2021. That's just the income earned in the state, not all of your income everywhere. The oddity is that whether or not you owe tax or need to file a return, your employer may have a withholding and reporting requirement.

Plenty of consultants have dealt with this for years, and it's just a fact of life. You have a few dollars of tax withheld in various states and just pass on filing a return to get $12 back. Some companies will gross you up to pay your tax, but not all. Price of working for a big company and traveling to different places.

Pinochet said:

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BenTheGoodAg said:

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I found this article helpful: Link

Some states start on the first day you're there. Some start after a period of residency - ie California is after 183 days.

Seems like there are a lot of instances that companies probably never consider that you'd technically owe taxes if you were following the state tax code. I'm sure many times, nothing is reported.

Example, you travel to a week of training in Colorado. Technically you're getting paid for working there. But there's really no way for Colorado to know..

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This isn't quite right. California has a nonresident tax and considers you a resident after half the year, but you're definitely subject to nonresident income tax before you get to 183 days. There are some states that have training exemptions (GA is one I believe) that will give you a few weeks of training before they have any tax on the employee or withholding requirement on the employer.

States have gotten very aggressive in this area. They're going after employers first for the withholding and reporting obligations, and then sending notices to all those people who never filed returns they should have filed. New York goes through the list of companies ringing the NYSE bell and assess the companies penalties for not withholding. Others do other things to get lists. It's a huge issue with tons of companies.

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California is one of the most aggressive states. I had a professional golfer for a tax client. Of course, any winnings he had in the State of California were subject to California income tax. But California came after monies he made from sponsorships. Like he got $50,000 for using a certain driver. California took the position that one reason he got that sponsorship was due to his playing in California tournaments. They wanted to do a ratio of California winnings divided by all winnings times the $50,000 and call that amount California income.

FTAco07 said:

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California is bad, but Nee Jersey might be worse. I filed a non resident New Jersey return due to K1 income and paid whatever the tax bill was. They calculated I owed more than I did and charged me interest and a penalty. After my CPA dealt with them and they agreed my number was correct, they waived the penalty but said they were not permitted to waive the interest on money I didn't actually owe.

We also have a client who is tax exempt and they are the only state that still requires the client to withhold and file for a refund. They refund small amounts in an ordinary time, but one year they owed our client a seven figure refund and it took over a year from filing to finally get the money back.

I hate CA, but I hate NJ more.

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lol, yeah I did one New Jersey tax return. Goodness what a mess. That was the same year I had the California mess with the golfer. After that, the only state returns I would do were Oklahoma and Louisiana. Life is too short to deal with that crap!