Virtual corporations, state registration and taxation
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This question seems to have been beat up on this site, but I can't find a direct answer.
If I have an internet business incorporated in Delaware that sells software online, and I personally live in North Carolina, yet my developers/designers/etc span from Virginia to Ukraine - what state am I 'doing business in' from a taxation standpoint? I assume most people will say "North Carolina', but why does it matter where I personally live? Is it the official business address I put down on my IRS forms that determines where the corporation is? If so, what's stopping me from opening a UPS box in Nevada (which has no income tax)?
Perhaps I'm an idiot, but I am unable to make a connection here.
1 Answer
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- You really should ask a tax specialist
- You are doing business in North Carolina. Why? Because when a customer calls and you pick up the phone, that's the state you are in. When you need to mail a letter, you do it from your home. Clearly, most activities required for the business to run are happening in Northern Carolina.
- Your developers, assuming they are independent contractors, are doing business in Virginia and elsewhere. It's their problem, not yours. From your business point of view, they are just outside vendors.
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Yes - however, in this particular situation calls are actually answered by a call center in Minnesota. My developers are actually shareholders as well (Virginia and Minnesota). So is 'state residency' set by the residency of the largest shareholder or 'most activities'? If so, how do you measure activity, by hours, complexity, cost? I realize a tax specialist has to be consulted for just about anything, I am asking this so I have a general idea prior to doing so. – Andy 14 years ago
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