I used to live in Nevada (which has no state income tax) and I am self employed by my own-Nevada based company. I live overseas now but if I moved back to America and settled in (for example) Missouri (or any other state that has an income tax)…
How would they know I am meant to be paying Missouri state income tax since I would work from home and be paid out of Nevada? Surely simply owning a house in a state doesn’t make one fall under its tax residency for income, but how does this work if one can telecommute and has no local interaction with anything business related?
How do states know who is living there - esp if one has multiple homes and telecommutes (and the employer is a one or two person company)?
States have the power to tax their residents’ income regardless of its source (i.e. where the income is earned). The definition of resident varies, and can include concepts like domicile, presence in a state for a specific period of time, having a permanent home in the state, as well as other things (and combination of several of these factors).
Mostly, residency tests are based on facts and circumstances. For example, for domicile the state looks at anything that points to your intent to make that particular state your home. For example, the tax auditor would check how much time you’ve actually spent in the state, if you own property there, whether your home is in the state, where your family lives, where you vote, even things like where you have a gym membership.
I am a tax lawyer, but I don’t do state tax and I’m not your lawyer, so don’t rely on anything I say (which should not be considered tax advice).
IMHO, you’d have to be audited by the state for them to figure it out (i.e., I don’t know of a repoting requirement that would make your noncompliance obvious). However, states are notorious for data mining various resources to increase their tax revenue, so I would expect them to match up addresses on various property tax rolls and voter registration lists to addresses of income tax filers to ferret out people in your situation. So, with penalties and interest considered, you’d probably be better off filing unless you are confident that there is no piece of paper the state tax authorities could use to determine your address (which seems like a verÝ hard determination to make).