How does state income tax nexus affect remote workers?

State income tax nexus decides which states can require you to file and pay income taxes when you work remotely. Unlike federal tax rules, nexus is a state-by-state standard: each state sets its own tests and thresholds. For many remote employees and independent contractors, that means your tax obligations often depend on where you live, where you perform work, and where your employer or clients are located.

Why nexus matters

  • You may owe taxes to multiple states in the same year if you meet nexus tests in more than one state.
  • Employers may need to withhold state taxes based on your work location, not just their office address.
  • Misunderstanding nexus can lead to amended returns, penalties, and missed credits for taxes paid to other states.

In my practice advising remote workers, the most common surprise is multi-state filing: clients assume they only owe taxes to the employer’s state or their home state, but the reality depends on state rules and travel patterns.

Core ways a remote worker can establish nexus

  • Residency or Domicile: If you are a resident (or domiciled) in a state, that state usually taxes your worldwide income. Residency definitions vary; some states use the number of days you spend in the state, others consider permanent ties like your home and where your family lives.

  • Physical Presence / Days Worked: Many states consider a threshold number of days worked in the state as creating nexus. The specific day-count varies by state.

  • Employer-Location Rules (Convenience of Employer): A few states allocate income to the employer’s state when an employee works remotely for the employee’s convenience rather than the employer’s necessity. New York’s “convenience of the employer” rule is a well-known example; if your employer is based in New York and you telecommute for convenience, New York may tax income earned while you work from another state (New York Department of Taxation and Finance).

  • Economic or Business Presence: States sometimes assert nexus based on the income you earn from customers or projects in the state, regardless of physical presence. These rules are more common for contractors, consultants, and business owners.

  • Temporary Work and Nexus Triggers: Short-term onsite days (meetings, training) can create nexus in states with low thresholds. That means even a few days of in-state work may require filing.

Common state-level approaches and examples

  • New York: Uses residency tests and the convenience-of-employer rule to tax nonresident income linked to New York employers (NY Dept. of Taxation and Finance). This often affects finance, tech, and media workers who live outside NY but work for NY firms.

  • Reciprocity and Withholding Agreements: Some neighboring states have reciprocity (e.g., Pennsylvania/Maryland/Ohio have specific arrangements for certain workers) that allow residents to avoid filing nonresident returns. Always confirm current reciprocity lists on state tax websites.

  • No Income Tax States: Living in a state with no personal income tax (e.g., Texas, Florida, Nevada) can reduce state tax bills — but you can still owe tax to states where you establish nexus by working there or by employer-allocated rules.

Authoritative resources: state tax departments, the Tax Foundation, and the Multistate Tax Commission provide up-to-date summaries of state rules (Tax Foundation, Multistate Tax Commission).

Practical steps to determine and manage nexus

  1. Map your calendar and work locations

    Track the days you physically work in each state and where you perform client work. A simple calendar log (dates, city/state, reason you were there) is one of the best defenses against audit issues.

  2. Confirm residency rules for your home state

    Residency matters more than many people realize. If you moved during the year or maintain homes in multiple states, review how each state defines resident and statutory residency.

  3. Check employer withholding and payroll setup

    If your employer uses the office address to set up state withholding, you could be under-withheld or over-withheld. Ask payroll whether they will withhold based on your work location and, if not, request a withholding change or make estimated payments.

  4. Review reciprocity and credits

    If you pay tax as a nonresident, your resident state may offer a credit for taxes paid to other states — but credits and rules differ. Confirm using state tax forms and guidance.

  5. Consider the convenience-of-employer rule

    If you work for an employer in a state that applies this rule, document whether remote work is for your convenience or required by the employer. Written employer policies, telework agreements, and HR statements can be evidence in disputes.

  6. Get professional help when multi-state filing seems likely

    A CPA or tax attorney experienced in multistate taxation can save money and reduce filing errors. In my experience, an initial consult often pays for itself by identifying state credits, correct filing status, and withholding fixes.

Recordkeeping checklist (practical)

  • Daily or weekly work log showing state, city, purpose of work
  • Travel records: flight itineraries, hotel receipts, meeting confirmations
  • Employer communications about remote work policies and job location requirements
  • Copies of state tax returns and withholding statements (W-2s, paystubs)

Examples to illustrate

  • Example 1: Resident of Florida working for a New York employer
    If you live and are domiciled in Florida (no state income tax) but work remotely for a New York company, New York may still claim tax on wages if the convenience-of-employer rule applies. Confirm with NY guidance and your employer’s payroll setup (NY Dept. of Taxation and Finance).

  • Example 2: Traveling consultant
    A consultant who performs projects in several states during the year may create filing obligations in each state where they meet the local nexus rules. Track days and billings to allocate income properly.

  • Example 3: Hybrid employee
    A hybrid worker who lives in one state and commutes occasionally to an employer’s office in another should track days in each state because a handful of in-office days could trigger a nonresident filing requirement.

Audit triggers and red flags

  • Multiple state W-2s or inconsistent withholding
  • Large deductions or credits claimed without matching state returns
  • Employer-reported wages tied to an out-of-state work address

FinHelp resources to read next: review our residency rules page to understand how state residency is defined and how it affects withholding, and use our state nexus checklist if you work outside your home state. See: “Filing State Taxes for Remote Workers: Residency Rules” (https://finhelp.io/glossary/filing-state-taxes-for-remote-workers-residency-rules/) and “State Nexus Checklist for Out-of-State Remote Employees” (https://finhelp.io/glossary/state-nexus-checklist-for-out-of-state-remote-employees/).

Common misconceptions

  • “I only pay tax where my employer is located.” Not always true — many states tax based on your residence or where you performed the work.
  • “If my state has no income tax, I won’t owe anything.” You can still owe taxes to other states where you’ve created nexus.
  • “A few days of work never matter.” A few days can matter in states with low thresholds or strict allocation rules.

Action plan for year-end and next year

  • Reconcile your calendar and paystubs before year-end to identify potential nonresident filing needs.
  • Request payroll withholdings to match your work state(s) or plan estimated tax payments.
  • If you changed residences mid-year, calculate part-year residency filings and look for credits to avoid double taxation.

Where to check official rules

  • State tax agency websites for the states where you live and work (e.g., New York Dept. of Taxation and Finance)
  • Tax Foundation and Multistate Tax Commission for comparative overviews
  • IRS for federal guidance and links to state resources (IRS state links page)

Sources: State tax agencies (e.g., NY Dept. of Taxation and Finance), Tax Foundation, Multistate Tax Commission, and IRS guidance on state taxation of income. See also the Multistate Tax Commission and state-specific publications for the most current rules.

Professional disclaimer: This article is educational only and does not replace personalized tax advice. For specific guidance about your situation — especially if you have multi-state travel, relocation, or complex employer arrangements — consult a CPA or tax attorney who specializes in multi-state taxation.

Last reviewed: 2025. If you need personalized help, look for a tax professional with multistate experience and request a written engagement that describes the scope of services.