State Taxing Authorities Game of Chess

[Corduroy Frog]

Neighboring states want to maximize their revenue by whatever means are necessary.  Some are downright ugly - NY doesn't like NJ, dating back to the Giants playing in the Meadowlands.  Rhode Island refers to their neighbor as "Taxachusetts", but the folks in Boston says Rhode Island taxes are even worse.  Three states are on the DelMarva so I dunno what they do.

Where I live has no income tax, but all 8 of our neighbors have them, so I have occasion to do many states from time to time. 

Assume Megamanufacturing is headquartered in California, and one of their factories is in Missouri.  The factory workers in Missouri don't have California taxes.  However one of the employees in MO is working from home. This could be "California Source Income" thus is subject to California taxes.  But neither this work-from-home person nor the factory workers have an office in California, other than the home office.  So what's the difference??

[For these purposes, ignore "credit for taxes paid to another state" or "states with no income tax".  This is another discussion].

Is there any consistence between these states?  For example, Michigan has no reciprocity with Indiana, but has reciprocity with Kentucky, which doesn't even border Michigan. Has the Supreme Court ever got involved to assure consistent treatment?  Probably not, although they did reverse themselves on sales tax charged out-of-state.

Do any of the board members have feelings on this, or are any of you aware of any legislation anywhere that can break the Gordian Knot?

 

[kathyc2]

8 hours ago, Corduroy Frog said:

Michigan has no reciprocity with Indiana

MI and IN have reciprocity for wages for state income tax.  However, IN also has a county tax that is not included in agreement. MI residents working in IN pay the county tax to IN and can then take a credit on MI return. I've yet to see DIY software handle this correctly. Even on professional software I need to manually enter it on MI return rather than having it flow from W2.

IN and IL do not have an agreement.  This is due to a large difference of IN residents working in IL (Chicago) than vice versa. I'm guessing the east coast states without reciprocity has to do with similar differences rather than where a football team plays. 

Craziest one I've seen without reciprocity is KS and MO.  TP works for company that has locations in both KS and MO portions of Kansas City.  W2 has wages and w/h for both states depending on which location she works at. 

[jklcpa]

Delaware doesn't have reciprocity with any state, and we are so small that I can be in PA in 5 minutes, NJ and MD in about 15-20 minutes. Especially where I live in the northernmost county, we have many out of state people working here for the big banks, chemical companies, oil refineries, etc. We also have a lot of residents with out of state wages in neighboring states, and that means many of my returns are multi state with the credit for taxes paid to nonres states.

Doctors and other professional medical staff that work at our largest hospital frequently have W-2s for DE, PA and now MD as our main hospital is expanding by buying the smaller ones including in our neighboring states.