What state source is royalty from a patent?

Forum|Forum|11 months ago
April 11, 2025
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On a 1099-MISC form, my wife received royalty income in 2024 from a patent that she filed years ago when she used to work at UCSD in California. In 2024 we were full year residents in New Jersey. How much of that income should be sourced in California for state income tax purposes?

Best answer by PatriciaV

Yes, because the patent is jointly owned with UCSD, the income will be sourced in California for the duration of the patent. Form 1099-MISC may list NJ for state tax purposes because New Jersey taxes its residents on all income, regardless of source.

MonikaK1

It depends. Under California Regulation 17211-17214(b), royalties are taxable to a nonresident if the intangible producing the income has a taxable or business situs in the State, if not, such income is taxable at the domicile of the owner.

See this ruling; though old, the regulation still applies.

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yaniviAuthor

Thanks for the response. I suppose the question is whether the fact that the patent is part owned by my wife and part owned by the University of California, and that the university is the one coordinating the income for the royalty and the one paying my wife gives it any "localization" in California.

Also interesting that her 1099-MISC in box 17 says "NJ" and not "CA" implying that the state income is based on residency.