Does paying contractors that work in another state shift my own taxes?

Question

Question from ​@Kelly DeSerio-Capozzi in the Your guide: Sole prop, LLC, or S-Corp webinar with ​@Geily Romero!  If I am taking contracts out of the state I'm registered in and paying contractors that reside in the state of the contract payee, does the tax I pay on that money shift to the state outline for taxes? Example - since FL doesn't have state tax, will I get to pay less tax on the income made from that state?

Geily Romero · Answer

Hi Kelly!I believe this is what you’re asking, it’ll break it up into a 2 part question for clarity.You’re taking contracts/working with clients in other states, outside of the state you’re registered in --You’ll pay income tax ( your federal and/oryour state), maybe self-employment tax (federal) as well depending on how you’re registered, when you file in your state and declare the amount paid to you.You’re paying contractors that reside in that state (not your state), if you paid them more then $600 via ACH, check, wire, Zelle, or some other payment method that was not credit card or via a credit car/payment processor then you’ll have to issue them a 1099 and they report that income on their taxes and as contractors they are liable for their own taxes.

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