Ralph (not his real name) formed a virtual business–a quite common activity these days. Perhaps he sells products (using Amazon or another large fulfillment company to do the actual movement of goods), or maybe he has a consulting practice or other service without a “real” office. Ralph resides in Denver, Colorado. His business is a Limited Liability Company formed in Colorado.
Ralph was not pleased to find that his LLC needed to file Colorado returns. He has employees–one in New York, one in Fresno–so he has to file New York and California tax returns, too, for the LLC; many states have a rule that if you have one employee you’re doing business in that state. Ralph’s doing a lot of business, too; he may have sales tax filing requirements in many states. You ignore state taxes at your own peril.
Now, it is possible to not have a state tax filing requirement for a business. My business (which is an LLC) is 100% in Nevada, a state with no state income tax. We do file payroll tax returns with the Nevada Department of Taxation, and we also are required to file a Use Tax return, but Nevada has chosen not to have many taxes that other states do have. That’s a legal way around state taxation at the business level.
Ralph didn’t like what I told him, and he’s not a client. He will find out sooner or later that ignoring state tax filing requirements is definitely a Bozo choice.
Tags: BozoTaxTips