Taxes and a wide range of other legal and business issues are affected by the legal concepts of residency and domicile. Individuals who have physical connections to more than one state should carefully consider the implications of the laws in each state that may claim jurisdiction of any legal or business issue. In some cases it is advisable to seek legal advice on these issues. Court case history records are filled with cases of individuals who did not recognize the impact of joint or overlapping state jurisdiction stemming from current or former residency or domicile.
This is the case for me. I’ve had physical connections in three states (Pennsylvania, New Jersey and Delaware) and a long history of legal issues in all three states. I’ve found it useful to consult an attorney from time to time and to keep a written statement of residency that includes a summary of the law with regard to professional licensing, martial law, civil law, business contracts, political activity, voter registration, banking, the post office, local law, municipal services and even library cards. I’ve learned that being clear, consistent and informed on residency and domicile legal issues has served me well over the years.
Following is a short summary of some of the issues that affected me in the past few years that might have value to other multi-state residents.
Multiple state residency
Most states recognize the legal status of multiple state residents. My states have a well developed system of case law that helps answer most questions.
Local municipal services
In recent years this issue came to a head with regard to municipal trash disposal. My local governments in both Pennsylvania and New Jersey have denied me access to the local township facilities, both claiming that I lack required credentials to dump garbage. After some work and communication with each government, I gave up. It is interesting to note that the requirements to dump trash are more strict than almost any other service – including voting, licensing and other government services. According to the applicable local municipal law and policies in both jurisdictions, I lack the required documentation and so I am neither a resident of PA or NJ! Now I simply pay commercial companies to perform these services rather than rely on local governments.
My residency and domicile situation has been relatively stable and manageable as since the 1980s. However, the politically hostile environment of the November 2016 election brought cases of dual state voter registration to light. Some people, including me, had inadvertently and unknowingly maintained overlapping voter registration in more than one location. According to voter registration roles, I was a registered resident voter in more than one location! This is illegal even though I did not vote in more than one location. In early 2017 after investigating the issue I took appropriate action by notifying the other Election Commission in writing on their prescribed form to say that I was no longer an eligible voter. The Election Commissions confirmed my cancellation of voter registrations. The problem is resolved.
Motor vehicle registration
In early 2018 New Jersey apparently adopted a policy that any person registering a motor vehicle in the state is automatically registered as a voter. Under the applicable law, my vehicle registrations (mostly business vehicles) are based on the location where the majority of vehicles are garaged the majority of the time. It is not possible, as far as I know, for an individual to register vehicles in more than one state even when the vehicles are located in entirely different states. The operational details of the new NJ registration matching program are not clear and yesterday I had online and telephone communications with NJ county officials who admitted that the policy may need to be examined. It seems possible that either incorrect vehicle registrations or incorrect voter registrations could result from this new state policy. Update: the policy was later amended to allow an opt out of automatic voter registration for resident vehicle registrants.
Jury duty, as far as I can tell, follows voter registration law. It is apparently illegal to serve on juries in more than one resident jurisdiction. In my case, I was advised to be careful and inform the court official of my voter registration status.
Sales and use tax
States have wide latitude to claim sales tax jurisdiction and that right as recently strengthened by the U.S. Supreme court. This is already a hot issue in the accounting profession and the heat is likely to be turned up further. In general, as a practical matter, when a state demands a tax, it is usually better to pay it rather than fight it.
State income tax
Pennsylvania has a flawed ‘matching system’ where the state threatens to revoke the business licenses of individuals who do not file income tax returns. On at least two occasions I successfully pointed out that the holding of a business license doe not necessarily trigger the requirement to file a state income tax return. On the other hand, states have been successful in taxing the income of former and part-time residents. Some states, like PA and NJ, have tax reciprocity agreements that affect this area of law.
I’ve worked for CPA firms and non-professional clients in multiple states. Both Pennsylvania and New Jersey Boards have opened investigations about my licensing status. One complaint was launched simply because I asked a theoretical question to the State Board of Accountancy about a business arrangement I was considering! Both issues are now resolved. I need to be especially careful in this area and I obsess over the details now. I’ve learned that these laws are complex. The stakes are potentially high for a CPA who unintentionally misinterprets licensing law. The AICPA developed an online tool called at www.cpamobility.org to help CPAs understand these laws.
I have plenty more examples of how residency and domicile affect other aspects of business and law. But I think the point is made: multi-state residents should not take the issue lightly.