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Some US states such as California and New York go to great lengths to keep former residents part of their tax base. As an example, New York continues to consider an individual to be domiciled in NY until and unless that individual establishes a permanent domicile elsewhere.

And (with few exceptions) if New York considers you to be domiciled in NY, you are considered a resident and must pay state tax on your worldwide income. This is distinct from individuals who have to pay state tax on NY source income.

Bottom line: if New York considers you a resident, you must pay state taxes on worldwide income, even if you did not set foot in NY or in any way have a connection to NY during the tax year.

Example: John Q. Smith lives in NY and pays taxes for five years. For all of 2015 he is outside of NY and couch surfs around the US without establishing a permanent domicile. He does not return to NY after 2015. New York considers him to still be domiciled in NY for 2015 and therefore he must pay NY state tax on all of his worldwide income for 2015.

Smith objects and faces off with New York in court. The first question would be what court(s) would have jurisdiction. New York would love it to be heard in state court and just cite their state tax law as their authority to tax Smith. And Smith wants it to be heard in federal court, but can't sue the state due to the Eleventh Amendment. So is that it, end of ballgame for Smith? The case is heard in NY, New York state law is the authority cited, Smith gets a state judgement against him and he has no way to appeal it outside of the state's jurisdiction?

And the second question, assuming somehow the case gets to federal court or another state's court: Smith argues he had no connection to New York during 2015 and shouldn't have to pay New York state taxes. New York state counters his argument with: "We have the authority to tax John Q. Smith under the legal theory __________________________". What would that legal theory be? Has this been tested in court?

Please do not give practical answers or workarounds that would short-circuit the process before they get to court. This is a hypothetical question on legal theory, not an actual case I'm trying to resolve.

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    Your John Q example is a little farfetched, but - more importantly - incomplete. When John left for his couch surfing tour of the world, did he maintain his NY apartment/house? What about his NYS driver's license? Did he continue to pay membership fees in NYS institutions (museums, places of worship, etc)? These and many other indicators like these are relevant in determining domicile and the intent of keeping or changing it.
    – Jack Fleeting
    Commented Jun 25, 2019 at 20:39
  • Huh, in my own experience circa 1996, should you become enrolled in a SUNY, a NYS employee of that school will go to great lengths to not find you domiciled in the state, your banking, lease and employment artifacts not withstanding.
    – user662852
    Commented Jun 25, 2019 at 22:47
  • Unfortunately, what a random SUNY employee did or did not do circa 1996 is not going to be really relevant when John Q is audited for failing to file tax returns and hit with back taxes, interest and penalties....
    – Jack Fleeting
    Commented Jun 26, 2019 at 0:48
  • @JackFleeting Those factors are irrelevant to this question because in the hypothetical they are already facing off in court (see last paragraph of the question). Under NYS law those factors make no difference. If you have not established a permanent domicile elsewhere, you are still considered by NYS to be domiciled in NYS regardless of your ongoing connection to NYS. Again, legal theory question, not practical question.
    – user395871
    Commented Jun 27, 2019 at 7:07

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On a certain level, it doesn't really matter which court hears the case, because New York's imposition of tax on a potential nonresident is a question of due process.

If he lands in a New York state court, he still raises the same constitutional challenge. If it is successful, it doesn't matter what the state law says. Even if the state court just says, "Suck it; you're in New York so you pay according to New York law," he of course still has the opportunity to appeal that judgment to the U.S. Supreme Court once he's exhausted his appeals in state court.

On the second question, the basic idea is that you can't be a citizen of the United States without being a citizen of one of those states (or D.C., Puerto Rico, etc.). We determine which state you're a citizen of based on domicile, so until a New York citizen sets up somewhere other than New York, he's stuck with New York citizenship. This concept is fundamental to a lot of different areas of law, and New York's approach is not at all unique.

I don't have a case to cite to at the moment, but this has definitely been tested in court. The general principle is well accepted, though there are certainly occasions where states are brushed back for interpreting it too aggressively.

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    "you can't be a citizen of the United States without being a citizen of one of those states " Even if you're born in, say Canada, of an American father, and never left Canada?
    – DJohnM
    Commented Jun 26, 2019 at 5:00
  • @DJohnM - Interesting question! First, AFAIK, there is not such thing as a "citizen" of a state for tax purposes - you can be domiciled/resident in a particular state (or not), as defined in that state's tax laws. So I can definitely see a situation with someone born in the US and moving to a foreign country (domicile and all). At that point he would be both a US citizen and a nonresident of all states - I imagine it happens pretty frequently.
    – Jack Fleeting
    Commented Jun 26, 2019 at 10:45
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    @DJohnM My answer sort of assumes that you're physically present in the United States. Yours would be an irregular example, but as Jack Fleeting notes, it nonetheless leaves you with a readily established domicile -- in Canada. Applied to the OP's situation, it should get the taxpayer off the hook for NY tax purposes.
    – bdb484
    Commented Jun 26, 2019 at 14:17
  • There are other areas of law where it would be highly irregular for a state to claim jurisdiction over a person simply because that person is classified as a resident of that state, e.g., most legal experts don't think that a state can prosecute one of their residents for obtaining an abortion out-of-state. This raises the obvious question of what legal theory is used to distinguish these situations.
    – Brian
    Commented Dec 4, 2023 at 16:17

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