As any business owner knows, taxes in California can be high. But should you relocate your company to another state? We get this question a lot, and there’s a two-part answer: It depends, and make sure you do it correctly.
Whether or not you move is dependent on your business’ specifics: credits and incentives you’re eligible for, if you can run your company effectively somewhere else, etc. Relocating your organization is a big ordeal; it takes much more than opening a PO Box in the neighboring state. It means picking up and moving your entire life.
As long as you’re a Golden State resident, your business will be liable for CA taxes. How does the state define a resident?
As Forbes explains, “A California resident is anyone in the state for other than a temporary or transitory purpose. See FTB Publication 1031.”
The state assumes you’re a resident if you’re within its borders for more than 9 months, and if you need to travel outside the state for your job, it takes 18 months to lose your status as a California resident.
Do you have a home within California just in case you need to be here? Are you claiming a property tax exemption as a California resident? If so, even if you’re not always living in that property, you’re still presumed a resident.
Another factor is where your spouse and children live. Think about where your children go to school. If they’re in college and you claim not to be a California resident, are you paying non-resident tuition?
There are other factors that California looks at to determine residency, including where you have bank accounts, organizations you belong to (professional, religious, social, etc.) and professional services you receive (such as doctors, dentists and attorneys). Individually they may not mean much, but combined together the state uses them to determine if you’re living here.
The point is, if you do decide to move out of California to avoid CA taxes, you actually need to do it. We’re happy to help answer your questions about whether you should relocate your business and how to do it legally! Contact us to get started.
Miles Consulting Group, Inc. is a professional service firm in San Jose, California specializing in multi-state tax solutions. Our firm addresses state and local tax issues for our clients, including general state tax consulting, nexus reviews, tax credit and tax incentive maximization, income tax and sales/use tax planning and other special projects, including the new California Competes Tax Credit. To learn more, contact us today at www.MilesConsultingGroup.com.
