Let’s be honest. The dream of working from a beach in Bali or a cabin in Colorado comes with a less-dreamy side effect: a tangled web of state and local tax rules. You’ve escaped the cubicle, but you can’t escape the taxman. For fully remote workers and digital nomads, understanding State and Local Tax (SALT) obligations isn’t just accounting—it’s essential for your financial sanity and legal compliance.
Here’s the deal: the old rules were built for a world where your physical desk and your tax home were the same place. Now? Well, now it’s a patchwork quilt of regulations that vary wildly from state to state. One wrong move and you could face double taxation, penalties, or a shocking bill. Let’s dive in and untangle this mess together.
The Core Concept: Domicile vs. Physical Presence
Everything in SALT for remote workers boils down to two main ideas. Think of them as your tax identity: where you’re from and where you are.
Domicile State: Your Tax “Home Base”
This is your permanent home. The place you intend to return to, no matter where you roam. It’s where you have your driver’s license, voter registration, and doctor. Your domicile state taxes your worldwide income, period. Even if you earn money while sitting in Portugal, your domicile state (say, New York) may still want a piece of it.
Physical Presence (or Source) State: Where You Actually Work
Most states have a simple, if inflexible, rule: if you perform work within their borders, you’ve sourced income there. For a digital nomad, that means spending two weeks working from a friend’s apartment in Austin could create a Texas tax filing requirement. Seriously. Even one day of work in some states can trigger it.
The conflict—and the headache—happens when these two states both claim the right to tax the same income. That’s where credits and reciprocity come in, but they’re not a perfect shield.
The Digital Nomad’s Biggest Tax Traps
It’s not just about income tax, you know. The SALT landscape is littered with pitfalls that can trip up even the most organized remote worker.
1. The “Convenience of the Employer” Rule (A Real Doozy)
This is arguably the most notorious rule for remote employees. States like New York, Nebraska, and Delaware enforce it. If your company is based in one of these states but you choose to work remotely from, say, Florida for your own convenience, New York can still tax 100% of your wages. Your physical location doesn’t matter. The logic? Your job’s “source” is still the office you’re not sitting in.
It’s a harsh rule that feels counterintuitive to our mobile world. To escape it, you often must prove the work arrangement is a necessity for your employer, not just your preference.
2. Creating “Nexus” for Your Employer
This is a stealthy one. By working remotely from a state where your company has no other presence, you could create a “nexus” for them. That means your employer might now have to register, file, and pay corporate taxes, sales taxes, or payroll taxes in that new state. Many companies are clueless about this risk, and discovering it can lead to… awkward conversations.
3. Local and City Taxes
Oh, it gets more granular. Cities like New York City, Philadelphia, and San Francisco have their own local income taxes. Move across a city line, and your obligations shift. For the true nomad bouncing between short-term rentals, tracking this is a nightmare.
Practical Strategies for SALT Survival
Don’t panic. With careful planning, you can navigate this. Here are some actionable steps.
Establish a Clear Domicile
This is step zero. Pick one state as your true tax home and cement your ties there. Update your license, register to vote, and keep bank accounts there. Document everything. This is your primary defense against states claiming you as a resident.
Track Your Location & Days Relentlessly
I know, it’s tedious. But you need a log. Use an app or a simple spreadsheet to record every state and city you work from, and for how many days. Most states have a bright-line test (like 183 days) for residency, but some have thresholds as low as 30 days for filing requirements. Guessing won’t cut it.
Understand State Reciprocity Agreements
Some neighboring states have agreements. For instance, if you live in Maryland but work in D.C., you only pay taxes to Maryland. These are golden for cross-border commuters, but they typically require you to live in one state and work in another—they often don’t protect the pure nomad.
Consider a “Tax-Free” State
This is the nuclear option, but a popular one. Establishing domicile in a state with no personal income tax—like Florida, Texas, Washington, or Nevada—can simplify your life immensely. Sure, you still have to deal with other states’ source rules, but your “home base” bill drops to zero. It’s a major reason for the migration to these states lately.
A Quick-Reference Table: State Tax Types
| State Type | What It Means | Examples |
| No Income Tax | No state-level tax on wages/personal income. | Florida, Texas, Washington, Nevada, Wyoming |
| “Convenience Rule” States | Can tax remote workers if employer is based there. | New York, Nebraska, Delaware, Pennsylvania* |
| High-Tax States | High marginal rates & often aggressive sourcing rules. | California, New York, Hawaii, Oregon |
| Flat Tax States | Single tax rate for all income, simplifying calculation. | Colorado, Illinois, Michigan, North Carolina |
*Pennsylvania’s rule differs slightly but has a similar effect for non-residents.
The Future is… Complicated
Honestly, the law is scrambling to catch up with how we work. There’s talk of federal legislation, more states offering digital nomad visas with tax carve-outs, and maybe—just maybe—a more unified system. But for now, we’re in the wild west.
The bottom line? Your freedom to work anywhere is a fantastic privilege. But it swaps the simplicity of a single W-2 for the complex puzzle of multi-state tax compliance. Proactivity isn’t just recommended; it’s your only real defense. Consult a tax pro who specializes in multi-state issues. Keep meticulous records. And remember, in the eyes of the tax code, your laptop isn’t just a tool—it’s a mobile tax jurisdiction generator.
The ultimate takeaway? True location independence means taking responsibility for the financial footprints you leave in every place you log on.
