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First and foremost, I would operate in a state with no income tax, such as Florida
But corporations do pay income tax in Florida
New York is a good option. It's important to note that if you provide services in another state, you don't always owe income tax in that state.
If it is temporary work, then there would be no income tax due to the state.
Also, by utilizing contractors that are non-US persons, you don't have to report 1099 information for these vendors,
So for example, say you have offices in New York and you do a job in California for 3 weeks and fly a non-US contractor there, then there is no tax owed to California, and no tax due to the US for the non-US vendor.
However, if you had longer term engagements, like those that last several months, then you would be likely considered as doing business in that state, and would have to pay tax on the activity you provide there.
A state such as Nevada or Wyoming does not have corporate income tax, so if you are open to having locations in one of those states that could be a viable alternative to New York.
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"So for example, say you have offices in New York and you do a job in California for 3 weeks and fly a non-US contractor there, then there is no tax owed to California, and no tax due to the US for the non-US vendor."Can you point me in some direction where this is stated?
Yes, we have had some tax lawyers do an analysis and they say that the non-US contractors do have income tax nexus in various states. So what would you do to find out the best state to setup office?
You could look to see which states have lower income tax rates on corporations. Or have no corporate tax at all. Nevada does not have a corporate income tax, so that is a friendly state.
And from a interstate tax point of view, probably it doesn't matter in what state you operate New York or Nevada. I mean if our contractors would have income tax nexus in a certain state (when they go to work on the premises of our clients), then it doesn't matter if our office is in New York or Nevada right?
That is correct
It just matters in terms of overall - wherever you have your office, you will pay tax on 100% of your profits
no matter what state it comes from
So Nevada is a good option from your point of view. Are there any other states that don't have corporate income tax?
Wyoming is one...
In states where there are large business centers (like NYC, Los Angeles, etc) there will be corporate income tax.
Nevada does not because they get so much revenue from gambling taxese
Do you know if there are big differences in corporate income taxes between the different states? Does New York have a high rate compared with other states?
They are fairly comparable
Great, final question, can you point me to where I can find corporate income tax rates of New York / New Jersey / California?
There's a PDF flyer of the state corporate tax rates
Glad I could help
Is there anything else I could assist you with today?
Thank you ... I think I have enough answers for now to continue my analysis.
Thank you Megan!