WA Resident, OR Employee, Where To Base New Business - Tax Forum - Tax Help Forum, Payroll Tax Forum, Business Tax Forum, Tax Questions, Free Tax Advice

PDXpilot · 01-11-2010, 12:40 AM

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I am a resident of Washington where there is no state income tax. However, I'm a full time employee in Oregon (where there is a very high state income tax) and I own a rental property in Oregon. At the moment, all of my income is subject to Oregon income tax law.

This year I will be starting up a web based retail business (as a sole proprietor) to try to earn some additional income. It's a fair assumption that the business will show a loss in the first year. Will any losses from a business like this reduce my Oregon tax liability? Or, since I will be working out of my residence, will Oregon not consider those losses?

I'm not trying to cheat the system. But I hate being taxed twice: once by Oregon on my income and then again by Washington on sales and property taxes.

Thanks!

Skyhawk · 01-12-2010, 03:04 AM

Oregon has jurisdiction to tax your wages earned in the state and your rental income earned in the state. Your loss will be incurred in a business that is conducted in Washington so that it is highly doubtful that Oregon would recognize it for their tax purposes. Sorry. When your Washington business is profitable would you offer to pay Oregon taxes on the profits?

PDXpilot · 01-12-2010, 10:18 AM

Thanks Skyhawk.

As a follow-up question, would there be any advantage in setting up a physical address in Oregon. Purchasing a PO box or a similar address. Obviously as an online business, there is no physical location to the operation. In that way I would take my chances on whether or not the end of the year would show a deduction or liability.

If that is an option, is it legal? I know that businesses move from one location to another when taxes become more favorable. And businesses incorporate in different states to take advantage of local legal benefits. I would just wonder if what is standard operating procedure for corporations might appear as tax evasion for individuals.

Skyhawk · 01-12-2010, 10:01 PM

What constitutes "NEXUS", that is a presence in the state of OR for a business. That is a legal question and I am a CPA and NOT a lawyer. If a post office box would satisfy the state of OR for tax purposes there would be nothing wrong with "netting" your positve income with your losses for the early years of the new business. When the businesws becomes profitable then move it to WA. Given the current economic conditions the states are not so forgiving when it comes to tax money. I would run this scenerio by a tax attorney before "taking off" in that direction. Keep it straight and level.