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Telemedicine and state taxes

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  • Telemedicine and state taxes

    Quick newbie question for those doing telemedicine,

    How do state taxes work for those living in one state and doing telemedicine in another state? Is there a possibility of combined taxation in 2 states? Does living in a state without income tax shield one from paying state tax? And does working for the VA change things?


  • #2
    You are always subject to the incomes taxes of your state of domicile regardless of the location of work.

    When you are subject to income taxes in another state usually* there is an inter-state agreement. This agreement allows to to receive a credit for taxes paid to the other state. You only pay taxes to your state of domicile to the degree they exceed the taxes you have paid to the other state.

    Long before COVID, there were specific states (Connecticut, New York, Pennsylvania, Arkansas, Delaware, Nebraska and by audit New Jersey) with a convenience of the employer rule. Massachusetts added a COVID emergency rule (I do not know if it is still in effect).

    Basically, if your telecommuting isn't an employer necessity, you are subject to this rule if the company you perform telecommuting services for is located in that state.

    Note: Providing telecommuting services in those states does not trigger taxation. Pay attention to the location of telemedicine company and not the client's.

    I have no idea how those states would view VA telemedicine. This is a question for the VA and their lawyers.

    *Some states do not allow credit for taxes paid and you can have double taxation.


    • #3
      Very complicated topic. I believe the states are going through a transitional period right now as the result of so many companies changing to tele-work after COVID. The problem arises when you live in a no-tax state and work in a tax state and the company hires contractors to work telemed as their standard of doing business. I believe many states haven’t caught up and adjusted their laws regulating nexus and taxation. We work with a few clients who live in TX and have telemed work in CA, which I believe will tax these services. However, their threshold appears to be $500k in revenue and you likely d/n make that much. Quite confusing. Quill gave us guidelines for sales and use taxes which also apply to other types of taxes, but it appears states have mostly applied it to sales and use.

      This article may be helpful.

      spiritrider, if you disagree with the above, would appreciate your comments.
      Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087


      • #4
        I don't disagree. This is complex and sifting landscape.