The rise of remote work has created new questions about California tax obligations. Whether you're a nonresident working for a California company, a California resident considering a move while keeping your job, or somewhere in between, the rules around remote work and state taxes are often misunderstood. Getting them wrong can result in unexpected tax bills or, worse, a residency audit from the Franchise Tax Board.
Nonresidents Working for California Employers
If you live outside California and work remotely for a California-based employer, the good news is that California generally cannot tax your wages simply because your employer is headquartered there. California taxes income based on where services are performed, not where the employer is located. If you're sitting in Texas doing your job, that's Texas-source income, not California-source income.
This is different from states like New York, which applies a "convenience of the employer" rule that can tax remote workers based on their employer's location. California doesn't have this rule. Your physical location when performing the work is what matters.*
However, this protection evaporates for any days you physically work in California. If you fly to the San Francisco office for meetings, attend a company retreat in Los Angeles, or work from a California coworking space, that income is California-source and taxable by California. For high earners, even a handful of California workdays can create a meaningful tax liability and a filing obligation.
In a residency audit, FTB will demand information that can reveal your physical presence, such as credit card transactions, cell phone records, employee badge data, and calendar entries. If you're claiming to work entirely outside California, your digital footprint should support that claim.
*These rules apply to W-2 employment. For independent contractors and other non-employment arrangements, the analysis is different: California sources income based on where the benefit of the service is received, not where the work is performed. If you're a nonresident contractor performing services for California clients who receive the benefit in California, that income may be California-source regardless of where you're sitting. (See, for example, Appeal of Bindley, OTA Case No. 18032402.)
Leaving California While Keeping Your Remote Job
For California residents planning to relocate, the ability to work remotely can actually support a domicile change. If your job previously required you to commute to a California office, and you've now negotiated a fully remote arrangement that allows you to work from another state, that's one less tie binding you to California.
But remote work alone doesn't establish a new domicile. The Franchise Tax Board will still examine the full picture: where you maintain your home, where your family lives, where you're registered to vote, where your doctors and advisors are located, and how you spend your time. Changing your work arrangement is one factor among many.
The key question FTB will ask: Is your presence in the new state permanent, or temporary and transitory? If you've moved to Nevada but your spouse stays in California, your children remain in California schools, and you return most weekends, remote work won't save you. FTB will likely argue your Nevada presence is temporary regardless of where your laptop logins took place.
Multi-State Income and Avoiding Double Taxation
Remote work often creates situations where you legitimately owe taxes to more than one state. The tax system has mechanisms to prevent true double taxation, but they don't always result in a wash.
If you're a California resident with income from another state: You may need to file a nonresident return in the state where you performed work, reporting the income sourced to that state. California will still tax you on your worldwide income as a resident, but you can claim the Other State Tax Credit (OSTC) on your California return to offset the taxes paid to the other state. This generally prevents double taxation, though the mechanics can be complex when multiple states are involved.
If you're a resident of another state with some California workdays: You'll file a California nonresident return reporting only the California-source portion of your income. Your home state will typically give you a credit for taxes paid to California. However, if your home state has lower tax rates than California, you'll still feel the impact: California will tax your California-source income at California rates, and your home state's credit only offsets what you would have owed them on that same income. The difference between California's rate and your home state's rate is real money out of pocket. For someone living in a no-income-tax state like Nevada or Texas, any California workdays mean paying California tax with no offsetting credit at home.
This is why careful tracking of workdays matters. Each day physically spent working in California creates California-source income that will be taxed at California rates, regardless of where you live.
One practical question that arises: if you work in two states on the same calendar day—say, a morning meeting in Reno and an afternoon meeting in Sacramento—which state gets to count that day? If both states counted "any part of a day" as a full day, a frequent traveler could end up with more than 365 days in a year, which obviously doesn't work for allocation formulas. The practical solution is to assign each calendar day to exactly one state, typically based on where you spent the night. This ensures your total days always equal 365 and gives you a defensible, consistent methodology. Whatever approach you use, document it clearly and apply it consistently; FTB will want to see that your allocation method is reasonable and supported by records.
Documentation Matters More Than Ever
Remote work arrangements create ambiguity that FTB can exploit in either direction. Clear documentation of your intent and actions is essential. If you're leaving California, you should be able to demonstrate that your move was permanent, that you've established genuine ties to your new state, and that your California connections have genuinely diminished.
This includes practical steps like updating your employer records to reflect your new state, ensuring your work is performed outside California (and documented as such), and making sure your digital presence matches your claimed physical presence. If you tell FTB you live in Nevada but your work VPN logs show consistent California IP addresses, you have a problem.
Conversely, if you're a nonresident who occasionally works in California, keeping careful records of exactly which days you were present and what work you performed can help you accurately calculate and defend your California-source income allocation.
When Remote Work Creates Risk
The highest-risk scenarios tend to involve people who make superficial changes without genuinely relocating. Moving your driver's license to Nevada while keeping your Marin County house, flying back to California regularly, maintaining all your California professional and personal relationships, and simply working from a different location is not a domicile change. It's a lifestyle choice that FTB will see through.
Similarly, nonresidents who underestimate their California presence create risk. If you "work remotely" but your calendar shows monthly trips to headquarters, quarterly board meetings in Palo Alto, and regular client visits throughout the state, your California-source income may be substantially higher than you've been reporting.
In both cases, the issue isn't remote work itself. It's the gap between the tax position being claimed and the underlying reality. Remote work has made it easier for people to live and work in flexible arrangements, but it hasn't changed the fundamental rules California applies to determine residency and source income.