You Don't Have to Live There to Owe Them Taxes | Three Things Thursday

You can owe income tax to a state you've never lived in — and in some cases, never even visited. If you own property in another state, have employees working remotely, or your customers cross state lines, your tax obligations may not stop at your front door. In this episode of Three Things Thursday, I'm breaking down three things about state income tax nexus that most business owners and real estate investors were never told. Here's what we cover: ▶ Thing #1 — Physical nexus follows activity. Where you work, where your property is, where your people are — those are the triggers. For real estate investors, owning property in another state establishes physical nexus there. Rental losses may mask the issue during ownership. The sale is where it shows up. ▶ Thing #2 — Economic nexus: what Wayfair opened up. Quill v. North Dakota (1992) protected businesses from out-of-state tax obligations without physical presence for 26 years. South Dakota v. Wayfair (2018) overturned that for sales tax — and states immediately started applying the same logic to income tax. The physical presence shield is gone. Service businesses and digital businesses have almost no protection. ▶ Thing #3 — One remote employee can create nexus you never intended. The post-COVID shift to remote work created income tax exposure across state lines for thousands of businesses. Factor-based nexus, convenience of the employer doctrine, payroll in new states — these are real compliance obligations most business owners discovered after the fact. Whether you're a business owner with remote employees, a real estate investor with out-of-state properties, or a professional services firm with clients in multiple states — these distinctions matter. Three Things Thursday drops every week. Subscribe so you don't miss it. 🔗 Questions about your specific situation? Visit us at bourbonnaistax.com This video is for general educational purposes only and does not constitute specific tax advice for your situation. Bourbonnais Tax Associates LLC | Bill Bourbonnais, EA, CTC, CTP, CTS | bourbonnaistax.com