Do I Pay Taxes When I Cross State Lines?


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We recently did a strategy involving someone who worked in more than one state. Typically most states have some kind of rule that allows you to make isolated work forays into that state without incurring a personal income tax obligation. But the rules are muddy, and constantly in flux, as states try to find income wherever they can.

There’s a bill floating around Washington that may hopefully clarify and standardize the procedure, assuming it can get enough support to move forward.

I came across this bill recently, while taking a look at interstate tax issues. Under H.R. 3359, people who cross state lines to work would have a 60-day window in which they wouldn’t be liable to pay income tax on earnings derived from work in that state. Pro athletes, entertainers and some public figures would not be included in this bill.

Business owners were in favor of the idea, as it would significantly reduce record-keeping and withholding issues for employees who fall within the guidelines.

The strongest opponents to the idea are, not surprisingly, the states with the most aggressive tax policies, who stand to lose the most. The Commission for the New York Department of Taxation and Finance reported that about 650,000 people commute into New York daily, and about 240,000 commute out of the state. He claimed that passing the bill would cost the state between $150-200 million each year.

We’ll see where it goes. It hasn’t been submitted to either the House or the Senate yet. I like the idea, as it would provide clarity and certainty for those of us who cross state lines frequently on business. And when I see a comment like “we’d lose XXX million,” I wonder how much of that is offset by the increased sales tax generated when those same workers buy food, gas, groceries, hotel accommodations, etc., while on the road.



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