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Foreign Corporation vs. State of Residence

    • 1 posts
    March 11, 2009 3:41 PM EDT
    Question - I have a 1996 created in NJ - S Corporation doing car repair.  In 2004, the individual (who IS the company) moved to NC.  ALL work/business is now conducted in NC.  To which State(s) does the Corporation owe State, CD401S, CBT 100S or Schedule K-1`s returns to?
    • 59 posts
    June 26, 2008 2:52 PM EDT
    There are several situations when you would be required to file a NJ tax return even if you incorporate in DE, these include:
    • If your corporation holds a general certificate of authority to do business in New Jersey issued by the Secretary of State, or
    • Your corporation holds a certificate, license or other authorization issued by any other department or agency of New Jersey, authorizing the company to engage in corporate activity within New Jersey, or
    • Your corporation derives income from New Jersey, or
    • Your corporation employs or owns capital within New Jersey, or
    • Your corporation employs or owns property in New Jersey, or
    • Your corporation maintains an office in New Jersey, or
    • Your corporation is a S-Corporation and your accountant was referring to the Individual taxes you would owe on your W-2 and K-1 income, or
    • Your accountant was referring to the Individual taxes you would owe on your W-2 income
    You should have a good enough relationship with your accountant that you feel comfortable asking him/her exactly what they meant and the best way to handle the situation.

    Best wishes,
    Gina
    •  is required to file a New Jersey corporation return. A
      foreign corporation that is a partner of a New Jersey partnership is
      deemed subject to tax in New Jersey and must file a return.

    ---
    Gina L. Gwozdz, CPA
    http://GLGcpa.com
    http://TaxTreasures.com

  • June 26, 2008 12:09 PM EDT
    On what basis were you told that your business would owe taxes in the state of New Jersey?  Do you work from home (while doing business in New York State)?  Do you store things at home for the business?  Is there any other reason to believe that your business might have some `nexus` in New Jersey?

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    ---------
    Larry Grossman, EA
    Reliable Accounting Services, Inc.
    Raleigh, NC, USA

  • June 26, 2008 2:05 PM EDT
    From what you`ve told me, I`d say no -- your corporation would not even file a New Jersey tax return.  You, as a New Jersey resident, would have to file an individual income tax return with New Jersey.  But that`s a different animal.

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    ---------
    Larry Grossman, EA
    Reliable Accounting Services, Inc.
    Raleigh, NC, USA

    • 434 posts
    March 12, 2009 5:21 PM EDT
    If you keep the business records at home in NJ and/or take business calls on the phone from your home in NJ or you use a NJ address for invoicing and payments, then as far as NJ is concerned, NJ is the location of the business and you will owe NJ their share of the state income tax and a "foreign" corporate tax.

    As far as I understand, nexus only applies to sales and use taxes.

    ---
    Steve Mann
    Internet Videographer
    MannMade Digital Video
    My Email


    • 2 posts
    June 26, 2008 10:32 AM EDT
    I`ve been told that in the following example, my business would owe taxes in the state of New Jersey:
     
    1) Incorporated in Delaware,
    2) Doing business in New York State
    3) Live in New Jersey (but do NO business there)
     
    Does anyone know if this is really true?   Doesn`t seem rational...!
     
    - da
     
     
     
     
    • 2 posts
    June 26, 2008 12:30 PM EDT
    Hi Larry,
     
    This was a question I posed to my accountant, and concerns a new business entity I would be starting.   There are a combination of factors that might be pertinent:
     
    I do indeed reside in NJ.  But my work is consulting in the New York (I work on site, NOT from home).  We`re thinking of moving out of state, so my thought was to purchase investment property in DE, rent it, then move into it later (say 10 years from now).   If there were legitimate tax savings, it seemed to make sense to incorporate in DE, then register and do business in NY (the current corp would be dissolved).   I would be living in NJ, of course - but I can`t figure out why the business would need to pay taxes there during that time.  
     
    Does any of this indicate "nexus" in NJ?   My accountant said that even though the corporation would be a Delaware Corporation, doing no business in NJ, I would need to pay NJ corporate taxes because that`s where I live.  (???)
     
    - da