How do states source self-employment income when I work for clients in multiple states?

When you work for clients in multiple states, each state uses its own rules to determine how much of your income it can tax. This is called 'income sourcing' or 'income allocation.' **The general rule for service income:** Self-employment income from services is sourced to the state where the services are performed — meaning where you physically work, not where your client is located. **Example:** You are a freelance designer living in Colorado, working remotely for clients in California, New York, and Texas. You physically work from your Colorado home office for all clients. Your income is sourced to Colorado — you owe Colorado income tax on all your Schedule C income, and generally do not owe California or New York income tax. **Exception — work performed in client's state:** If you travel to California to attend a client meeting or do on-site work for 3 days, California may tax the income attributable to those 3 days. California uses a ratio of California-working-days to total working days. **Allocation formula most states use:** - % of income taxable in State X = Days working physically in State X ÷ Total working days - Applied to your total net Schedule C profit **States with 183-day rules:** Some states (Illinois, Minnesota) assert full-year resident taxation if you spend more than 183 days in the state — even if your domicile is elsewhere. **Documentation:** Keep a contemporaneous travel log or calendar showing which state you worked in each day. This is your defence if a state audits your income allocation.

• Service income generally sourced to where services are physically performed
• Remote work for out-of-state clients is taxed where you sit, not where client is
• Days physically working in another state create income tax exposure there
• Many states use a days-worked ratio to allocate income
• 183-day presence may trigger full-year residency tax in some states