Income taxes on remote work may get a supreme court review

[Twotoes]

3 hours ago, podwerkz said:

Yes, I know how it works. The point I was making is the nonsense (in my opinion) of making a person pay state taxes based on what state they happen to temporarily be in when they earned that income.

If income was earned in a particular State it is taxed in that State. No nonsense at all. 

Regarding Common Law Marriage: every State has different laws. Most community property States have repealed common law marriage. You don’t give up half of your property unless you say “I Do”. In Calif it used to be if you lived together for 6 years but that was changed many decades age. Also per the previous comments regarding TX common law marriage, I believe that you must live in TX full time for it to have any effect. If you are in an RV and travel out of TX for several months (snow bird) I don’t believe this would qualify. 

[Chalkie]

12 hours ago, Lou Schneider said:

Truck drivers are usually dispatched and paid out of a single terminal, even if they are driving across the country.  This becomes their place of employment for tax purposes.

And this, I think is the root of it. If a trucker is paid using the terminal as the place of employment, then why should the same principal not apply to those that work from home, no matter where that is, by using the office of employment as their place of employment for tax purposes? 

This seems to me to be simple. Yet, as the start of this thread showed, it is not as some states want to tax your income in the state where you are working, not the state where your employers office is located. 

This battle has been going on since long before work at home was common. I grew up in the Kansas City area and it was very common for someone to work in Missouri and live in Kansas, or vice versa, and the taxation issue was squabbled then as well. Generally you got credit for whatever you paid in the other state on your own state income tax, however, Kansas City, MO had it own income tax, and still does, to complicate matters. 

[Kirk W]

5 hours ago, Twotoes said:

Regarding Common Law Marriage: every State has different laws.

My point exactly, and it may well be that TX has changed the law from what it was more than 20 years ago when the subject was pointed out to me, but the example still applies as each state makes their own laws and they also change at times. That is the very reason that some "experts" suggest that one should discuss domicile with an attorney in the state that they plan to base from. The list of legal issues that could potentially affect some RV full-timers is very long and usually quite personal. Things like estate law, power of attorney laws, child custody laws, and the list is infinite. With many working people and families now joining the fulltime community, the list of potential legal questions is something that continues to grow. 

[Barbaraok]

On 12/29/2020 at 4:29 AM, ToddF said:

It's a common misconception that moving to a "no state income tax" state will be a smart move by itself. In Texas, for example, you will pay sales tax on your groceries. (Not so in Minnesota). In Texas, your property taxes will be approximately double what the typical Minnesotan pays after factoring in a state refund program. Also, 40-50% of retirees don't have enough income to pay any federal or state tax, so their state of domicile makes no difference in their income tax bill.

As far as preparing your own taxes, yes. You can change the oil in your motorhome and truck too after you cut your wife's hair.

Except when you are talking about full-timers, they don't pay property taxes in Texas, and most of the time they are traveling so they pay sales tax to whatever state/locality they are currently in when they shop, eat out, etc.    And while a lot of don't pay federal taxes in retirement, by your own figure at least half of us do.    So we are doing things like figuring out how much we can pull from tax-deferred accounts once we are retired and how to do it.   Things like pulling money for a major upgrade you have done in January - you pull 1/2 in December and the rest in January.  

[sandsys]

Use tax, as Todd mentioned, is something many people are not aware even exists. Are all those tax-free purchases from Amazon really tax free to you or are you skirting local laws?

Linda

[mptjelgin]

12 minutes ago, sandsys said:

Use tax, as Todd mentioned, is something many people are not aware even exists. Are all those tax-free purchases from Amazon really tax free to you or are you skirting local laws?

Linda

I have been paying Texas sales tax on all Amazon purchases for many years now.  Are there states where Amazon doesn't collect sales tax?

[ToddF]

The "use tax" was on the "honor" system up until the "Wayfair" case which required online retailers like Amazon to collect sales tax at the time of purchase. (Much harder to evade now).

Here's an example of what can happen...Minnesota Department of Revenue goes to an out of state seller of cigarettes and obtains a list of all of their Minnesota customers and how much they purchased. Then they look for a "use tax" return from the buyer, and finding none, send a bill to the taxpayer. (Not a pleasant experience).

Absolutely one of the big selling points of being a fulltimer is the potential elimination of a property tax bill from the budget. My brother in Yorkville IL commented that he escrows about $700-$800 per month for property taxes on his modest suburban home. At that point for me, the "for sale" would go up and I'd move into my RV in a heartbeat.

[sandsys]

2 hours ago, mptjelgin said:

I have been paying Texas sales tax on all Amazon purchases for many years now.  Are there states where Amazon doesn't collect sales tax?

Like Todd said, now they do. But, I am old so remember when they didn't.

Linda

[Chalkie]

3 hours ago, mptjelgin said:

I have been paying Texas sales tax on all Amazon purchases for many years now.  Are there states where Amazon doesn't collect sales tax?

Anywhere that Amazon has a physical presence they are required to collect sales taxes. Now that they own Whole Foods and looking at where they have distribution centers, etc. that is likely every state.

 

[Chalkie]

2 hours ago, ToddF said:

My brother in Yorkville IL commented that he escrows about $700-$800 per month for property taxes on his modest suburban home.

Holy smokes! That would have had me leaving the state no matter how I had to leave it. The last property tax bill I paid on our home in Colorado was $620 for the year.

[Twotoes]

I have 3 rentals in Calif. The property tax on one is $800 a month. The other 2 are $325 a piece, for a total of $1,450 per month to property taxes. 

[mrschwarz]

On 12/29/2020 at 1:01 PM, sandsys said:

 

... Many RVers wait until they get to Oregon to buy tires so they won't have to pay tax on them. What else?

But you do report the purchase in your home state so you can pay use tax there, right? Many states require it.

Besides looking at taxes there are other factors to consider. We are fulltimers and have changed our state of residence twice since we hit the road. Both times were for individual PPO health insurance. Here's what we learned along the way:

In Washington state, sales tax for motor vehicles was higher than Texas where we moved from. Some weirdness in sales tax law allowed our Jeep to be accepted into the state without paying the difference. Our motor home, on the other hand was not exempted. They looked at the purchase price from several years earlier and calculated the difference between Texas and Washington. It was not an insignificant amount. After a visit to a local state revenue office, we got the sales tax portion down to a few hundred dollars. Since vehicle registration fees were so much lower than Texas, we could make up the difference in a couple of years. The only health insurance company offering PPO insurance had other plans, though.

The next move was to Florida. Taxes were lower, as well as registration and license fees. Then we called the insurance company to move our vehicle insurance. "Sure!" they said. "No problem!" they said. "Give us a minute to recalculate your premium", they said. Upon hearing the new rate and after regaining consciousness, they explained that the 250% rate increase was because of hurricanes and some other stuff. After shopping around, we managed to get insurance with only a 50% increase in cost.

It's not just taxes. It's everything. Once my sweet child bride qualifies for Medicare, we're going to do it all over again!

[Kirk W]

22 minutes ago, mrschwarz said:

It's not just taxes. It's everything.

Your story just verifies something that I have said many times. Most people do not do a complete examination of things before they choose a state for domicile. What of estate laws in the states that you have been in so far? There are many legal issues as well as taxes and fees.

34 minutes ago, mrschwarz said:

Many states require it.

What states require you to report purchases made in other states or non-sales tax states?  I have never heard of that one before.

[Jaydrvr]

19 minutes ago, Kirk W said:

Your story just verifies something that I have said many times. Most people do not do a complete examination of things before they choose a state for domicile. What of estate laws in the states that you have been in so far? There are many legal issues as well as taxes and fees.

What states require you to report purchases made in other states or non-sales tax states?  I have never heard of that one before.

Ohio requires it. It's a line item on the annual state income tax form. Jay

[mrschwarz]

15 minutes ago, Kirk W said:

...What states require you to report purchases made in other states or non-sales tax states?  I have never heard of that one before.

I was pretty sure this was true so I did a search. Here are the first two I found:

https://dor.wa.gov/taxes-rates/retail-sales-tax/marketplace-fairness-leveling-playing-field/consumers-buying-out-state-sellers

https://azdor.gov/individual-income-tax-filing-assistance/understanding-use-tax

Here is a general explanation of sales tax.

https://www.salestaxinstitute.com/sales_tax_faqs/out_of_state_retailer_collect_sales_tax

By the way, states requiring use tax isn't new. I was originally from New England, so it was easy to go through 4 (or more) states in an hour's drive. My home state (Connecticut) wasn't bashful about letting us residents know about this.

[bigjim]

1 hour ago, Kirk W said:

What states require you to report purchases made in other states or non-sales tax states?  I have never heard of that one before.

Real memory test for me.  I believe it was supposed to happen in Texas at least for certain items.  I ran across this somewhere years ago and was surprised as I had never heard of it before and I don't believe it was ever enforced much, if at all.  I hope someone can clarify this that actually knows at least in regard to Texas.  It would be a nightmare to enforce.

[TXiceman]

When we lived in Oklahoma, the state income tax form had a line to report items bought out of state that you paid no tax on.  Needless to say, no one reported anything and how would they police it?

Ken

[Kirk W]

4 hours ago, Jaydrvr said:

Ohio requires it. It's a line item on the annual state income tax form.

Interesting. Texas has no state income tax so no tax form. The same was true when we lived in WY. I wonder how many people report such purchases or even keep track of them? 

4 hours ago, mrschwarz said:

Here is a general explanation of sales tax.

As I read that, it applies to the internet retailer who is selling items to residents who are buying from and receiving into the state. I can't speak for all states but know that TX was a party to the court case that supported that decision and they have been required to collect sales/use tax if doing business into the state via the internet. It was the increasing internet retail sales that brought that about because it not only was uncollected state revenue but it also gave the internet sellers a competitive advantage over the local businessmen. While I like paying less, I understand the position of the local businessmen and I support it. Amazon does collect sales taxes on purchases here and I believe most states now. But that is not the same as driving to Oregon and buying a set of 6 new tires without sales tax, as it would be if you bought the same tires via the internet to be shipped to your home. The Ohio example is to report things you bought while you were physically out of  Ohio (when an Ohio resident) and then pay sales taxes on those purchases. 

3 hours ago, bigjim said:

Real memory test for me.  I believe it was supposed to happen in Texas at least for certain items. 

What you probably remember from TX is the requirement for internet retail sales into the state to collect the tax as do the physical stores here. That did happen and has been done for some years now. Amazon began to collect state sales taxes on April 1, 2017 as a result of the court decision. 

Edited January 1, 2021 by Kirk W
correct typo

[bigjim]

Even though TX has no income tax I believe it was something akin to what TXiceman said.

 

I think remember what you said about the internet sales tax you spoke about Kirk. I know I recall for sure about having to calculate the tax on stuff ordered through mail order catalogs from out of state and they had to remit it to Texas. I don't know if local sales tax was included but am sure state sales tax was.  IE: Spiegel out of Chicago and I believe Monkey Wards and maybe Sear Roebuck.

Did they not purpusesley not tax internet sale for years to help kick-start the internet. Of course it was cheating all sticks and bricks of fair play on sales. Once everyone got used to it and the online sales got enough power everyone screamed bloody murder about governments wanting to institute a tax on internet sales.

[Kirk W]

1 hour ago, bigjim said:

Did they not purpusesley not tax internet sale for years to help kick-start the internet.

I don't believe that was ever the intention, at least not at the state level. It would have been self defeating. Texas has had a sales/use tax at least as long as we have lived here as I used to charge sales tax on labor charges when I moved here in 1989.

1 hour ago, bigjim said:

Even though TX has no income tax I believe it was something akin to what TXiceman said.

And how would you have reported such purchases? And how would you have then paid them since a business must have a sales tax license in order to collect the tax and send it in?

EDIT: I just made a second post on the subject as bigjim is right! Digging further, I find that the key is if the tax free item is then used in the state of TX. What I can't locate is an answer if you become exempt from that tax if you use it half or more in a different state.

Edited January 2, 2021 by Kirk W
Add information.

[Kirk W]

I did some more digging since I know that it has been called a use tax here in TX. I finally found this information on the TX Comptroller's website. 

Quote

USE TAX

Who is responsible for this tax?

Anyone who buys taxable goods and services that are stored, used or consumed in Texas from a seller who does not charge Texas sales tax owes Texas use tax.

Most Texas sellers collect sales tax and remit it to the Comptroller’s office. But when you buy items online or by telephone, email or fax from mail order catalogs, the seller may not, and may not be required to, collect Texas sales tax. If you buy the item for use in Texas, you owe Texas use tax.

For example, if you buy a shirt through an online auction from a seller in Ohio who does not charge Texas sales tax, or if a New York electronics store sells you a camera through its website and does not charge Texas sales tax, you owe Texas use tax on the price of the item.

Items bought in another country are also subject to Texas use tax. For example, if you buy something in Mexico that you bring back to Texas, you owe use tax on the purchase price.

If you don't have a Texas sales tax permit, file the use tax due on Form 01-156, Texas Use Tax Return (PDF). Form 01-156 is due no later than January 20 of the year following the year in which you bought the item, as long as the amount of tax to be paid on your untaxed purchases during a calendar year does not exceed $1,000. For example, if on October 12, 2005 you buy just one item during the current calendar year that is subject to use tax, and owe $8.25 in use tax, you can file Form 01-156 and pay the tax any time through January 20 of the following year.

Texas Use Tax Return

So that brings up the question, does anyone know of a TX resident who has ever filed that form to pay sales/use tax on things bought tax free? For me, it is don't ask and I'll not lie to you. 

[Barbaraok]

Well since our rig hasn't been in Texas in years, the tires purchase in Oregon have never been used in Texas so I'm not about to worry about it.    How many states have no sales tax - very few, so most things you buy as a full-timer you will use as you go down the road.

[bigjim]

16 hours ago, Kirk W said:

So that brings up the question, does anyone know of a TX resident who has ever filed that form to pay sales/use tax on things bought tax free? For me, it is don't ask and I'll not lie to you

I sure don't.  I have been a Tx resident since 1953, a little more than a month before I turned 6.  My dad was very knowledgeable about taxes and prepare Fed, income tax in season and I never heard anything from him or anyone else.   I can't remember when I became aware of it but at least 5 or more years ago for sure. Definitely I immediately thought how do they enforce this especially for lower cost items.  For some big ticket items you might be more likely at risk to not report IF they ever decided to get their/our tax money.  It strikes me as a not well thought out way to levy taxes.

I kind of think in a related way the vehicle inspection fee that goes to the different entities is because they can get the revenue and to  a degree the inspectors are left in the cold. They just did not want to be honest and say it is a tax.  Every time they call something a FEE they are just trying to avoid looking responsible for raising your taxes, even if there are legitimate reasons to do so.

IE: in Tx we have a road and bridge fee. Does that sound better than  road and bridge tax.  And we sure need good roads and bridges.  Do you feel any better because they call it something different. It still comes out of your pocket.

Edited January 2, 2021 by bigjim

[Blues]

On 12/29/2020 at 11:51 AM, ToddF said:

Sorry about the misstatement on Texas sales tax. Truthfully, I think I was remembering Alabama which I think taxes all groceries.

With all due respect, wouldn't it be a good idea to verify your statement before putting it out there?  As it is, you're leaving it up to others to verify it, and post a challenge if appropriate.  If nobody had bothered to do that, your misstatement would have stayed out there, as fact. 

I used to have a job related to Texas sales tax.  At the time, there was the "six doughnut rule," where a purchase of five or fewer doughnuts was considered for immediate consumption and therefore not taxable, and a purchase of six or more was exempt.  I was going to mention the rule in this discussion about taxes on groceries in Texas, but decided to verify it first, and turns out it's no longer the rule. 

It took me only a few seconds.  Probably less than it would have taken someone unfamiliar with the rule who was trying to investigate it himself, not to mention that having one person check the accuracy of something before posting it is a lot more efficient than having multiple people checking it after it's posted.

[Blues]

On 12/29/2020 at 11:58 PM, Twotoes said:

In Calif it used to be if you lived together for 6 years but that was changed many decades age.

The California Legislature abolished common-law marriage in 1895.

There are court cases addressing claims of property rights for cohabiting couples (Lee Marvin ring a bell?), but that's just property rights, not marriage itself (which offers benefits other than property rights, and has been unavailable in California without a ceremony for over 125 years).

 

Quote

Also per the previous comments regarding TX common law marriage, I believe that you must live in TX full time for it to have any effect. If you are in an RV and travel out of TX for several months (snow bird) I don’t believe this would qualify. 

Why not?  Once a couple becomes common-law married, their marriage is treated exactly the same as a ceremonial marriage.  For example, they have to get a divorce to dissolve it, just like ceremonially married people do.  There's no such thing as "common-law divorce."  So why wouldn't they be able to travel? 

 

On 12/29/2020 at 5:12 PM, Kirk W said:

A former active member of these forums made me aware of one that I had never thought of in that he traveled with a lady, not his wife and in TX they would have been legally married once they shared the RV for 2 years.

On 12/30/2020 at 5:48 AM, Kirk W said:

My point exactly, and it may well be that TX has changed the law from what it was more than 20 years ago when the subject was pointed out to me,

Did he say where he got this information? 

Only a handful of states still allow common-law marriages to occur, and not a single one of them has a law that imposes a marriage on a couple based solely on X amount of time living together.  It doesn't matter how many people think that, or how often they say it.  It's simply not the case.  And for the record, people usually claim it's 7 years, for some reason.  They're always wrong, but it's an interestingly consistent wrong. 

In Texas, common-law marriage has been recognized since 1847.  Despite a push to abolish common-law marriage, in 1970 the Texas Legislature refused to do so and instead enacted a statute codifying the requirements for establishing a common-law marriage (Texas calls it "informal marriage").  The requirements are the same today as they were in 1970:  They agreed to be married, and after the agreement lived together in Texas as husband and wife and there represented to others that they were married.

There is nothing that would impose a common-law marriage on a couple solely based on living together, regardless of the amount of time. 

And if a couple wants to be sure their common-law marriage is recognized, and not just subject to being declared later by a court based on evidence, Texas allows them to file a Declaration of Informal Marriage, on which they can specify their date of marriage. 

 

Edited January 13, 2021 by Blues