Do I select "No, I didn't make money in other states" if the income I earned ($75 in three transactions) is well below the tax threshold for that state?

Forum|Forum|1 year ago
February 20, 2025
2 replies
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I own and operate a single member LLC. I file as a sole proprietor. I sold tickets to my online events to customers in New York, Washington D.C., and California. The tax threshold for those states are: New York: $500,000 in sales and more than 101 transactions Washington D.C.: $100,000 in sales or more than 200 transactions California: $500,000 in sales Since my transactions and sales are WELL BELOW those thresholds, do I select "No, I didn't make money in other states." Thank you for your help!

ThomasM125

Yes, you can indicate that you didn't make money in other states since you won't be filing tax returns there.

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rjs

Employee

You are mixing up sales tax and income tax. The thresholds that you listed are used to determine whether you have to collect sales tax for the sales that you made in those states. But TurboTax is not asking about sales tax. It's asking whether you had income from other states that would require you to file income tax returns in other states (besides the state that you live in). The sales tax thresholds have nothing to do with income tax.

I assume that you did not do any work in New York, California, or D.C. (You didn't say what state you live in. I assume it's not one of those three.) Your income from selling the tickets came from work that you did in the state that you live in. As far as income tax is concerned, it doesn't matter that you sold online to customers in other states. So you should answer "No, I didn't make money in other states." That's not because you are below the sales tax thresholds. It's because you did not earn any income for work that you did in other states.

On the other hand, if you did go to another state and make sales while you were there, you would have to pay income tax to the other state on the income that you made there. Each state has rules or thresholds to determine whether you are required to file a nonresident income tax return for the state, but they are not the same as the sales tax thresholds.

I want to make one other point to complete the picture for anyone else who might read this reply, but this does not apply to your situation. Making money in another state does not mean only income from working in that state. If you get income from renting or selling property in another state, that is income from the other state, even if you never went to the state where the property is located.

clairevappelmansAuthor

That was incredibly helpful to have you distinguish between sales tax and income tax, thank you. I needed to be paying attention to income tax thresholds, not sales tax.

I live in the state of Washington. For New York, Washington D.C., and California sales I was physically in Washington state while providing the online services to my customers.

I looked up the income tax threshold for nonresidents for Oregon (the only state where I was physically present with my customers) and I am well below the threshold for their nonresident filing requirements. I made $50 in sales and their Oregon gross revenue for single filing status is $2,745.

I hope what I said in my reply is clear. Thank you for your help!