Tax Question: self-employed in NH with clients in Boston (income, income tax)

[jojoboulette]

This is a theoretical question as we don't live in NH yet, but are considering a move there.

Can someone tell me whether we would have to pay MA taxes if we are incorporated in NH but with some (possibly a lot) of clients in Boston/surrounding area? We would probably have clients in other parts of the US as well (mainly CA) but if we lived in NH, would probably switch at least some of our clientele to the Boston area.

We would not work in the state of MA (except perhaps to have face to face meetings occasionally), all work would be done from our NH location.

Anyone out there doing this now or has done it that can comment?

Much appreciated, thanks!

[GregW]

IIRC New Hampshire businesses do not pay Mass taxes but I am not certain. I live in NH and work in Boston and pay Mass. income tax.

[mdamien]

If the work is done in NH, then you shouldn't need to pay Mass taxes. Incidentally, anyone considering incorporating in NH should keep in mind that NH has an 8.5% "business profits" tax. The numbers could still work out for you, of course, but it's something to keep in mind.

[jojoboulette]

Thanks for your reply... the business profit tax would be less than what we're paying here in CA, so it would work.

So, am I understanding correctly that there is no state income tax in NH?

[GotBackHome]

no, there is no state income tax in NH - aside from the small percentage of dividends tax and that 8.5% business profit tax. No 'regular' income.

question about that business profit tax... is that only on incorporated businesses, or for any sole proprietor business?

[buck naked]

a business profits tax is imposed on the net income of all types of business entities, including corporations, partnerships, LLC's and sole proprietorships.

Also, a business enterprise tax, somewhat like a capital stock or franchise tax, is imposed on all businesses, but companies pay only the higher of the profits tax or the enterprise tax, in effect. Also, some very small businesses are exempt from one or both of those taxes.

[GotBackHome]

Thanks Buck! Something we'll have to stay aware of since we're both likely to have/try sole proprietorships. I doubt mine will ever make a lot of money though - hopefully his will make a little.

[lisa g]

Our NH Corp. pays Mass taxes only on work done in Mass

[skinut74]

if the ma taxes would be a deal breaker as far as relocating, i would consider consulting with a cpa in nh who is familiar with this type of problem in order to be positive as to the correct answer. if you are just curious and will still proceed regardless of the outcome, i would follow the advice given on this forum and woory about the taxes next year when your taxes are prpared

[mdamien]

Good advice, skinut74.