What is the best agriculture based business?

Can I move my NYC-based business to Seattle, Washington but keep the NY Office and still deduct office rent as well as avoid the 4% NYC unincorporated business tax?

• I'm an internet-based business. So if possible, I would like to avoid the extra 4% NYC unincorporated business tax. Also, I heard Washington state has no state sales tax, so that's another incentive for moving my business headquarters from NYC to Seattle, Washington. Currently NY state has something like 10% state sales tax. So I am considering moving to Seattle, Washington. However, I would like to keep the office in NYC so my business partner can use the office there. Would this setup allow me to avoid the NYC unincorporated business tax and also allow me to take advantage of the 0% state tax in Washington? How do other businesses with multiple business office locations do it? Do they get to deduct office rent from all locations? And if they have an office in NYC, does that mean they necessarily have to pay the 4% unincorporated business tax even if they are an internet-based business (rather than a local brick-and-mortar store?)

• Answer:

  Having a physical location in NY will mean your partnership is still subject to NY taxes, but it may reduce the tax somewhat.  The term you are looking for is nexus, which means physical connection.  States are allowed to assess tax against a business when you have nexus with that state.  Nexus can be created by any number of factors, but typically it is because a business has physical assets, locations or employees in the state.  If you moved the entire business and no longer had a general partner or office in NY, then you would likely not be subject to NY tax because you would have broken that physical connection, but maintaining a physical office for the business maintains the nexus with NY. You would then need to apportion your income for the business based on where you did business.  Certainly you could establish that the main office of the business is in Washington and thus you are only subject to NY tax to the extent of income that is attributable to NY operations or customers and the balance would be subject to tax in Washington. Even though Washington does not have an income tax it does have a Business and Occupation (or gross receipts) tax which your business might be subject to. As for how do other multi-location businesses do it? They have to consider all the states where they have nexus and report for those states.  Internet based business have certainly complicated that for states, because most internet businesses don't need to have much in the way of physical locations to conduct business all over the US or the world for that matter. State laws are trying to catch up by redefining what nexus is.  California recently passed a law creating the concept of "economic nexus", that says if you sell enough to CA customers, you have nexus in CA.  The problem for states like CA goes back to the 90's when North Carolina tried to tax Quill, a mail order company.  Quill had no physical employees, assets or locations in NC and the case went all the way to the US Supreme Court which told NC they could not tax Quill because the company did not have nexus in NC.  The basic economics of a mail order business closely resemble the structure of an internet based business and so the current law is that if you don't have nexus, a state can't tax you and it will probably take a constitutional amendment to change that, but until then I think you should expect states to take an aggressive approach to trying to extend nexus to internet based businesses whenever possible and certainly if you maintain a physical office in NY, you are still going to pay some amount of NY tax.