Toolkit · Tax

The Domicile Change, Residency Audit, and Multistate Nexus Toolkit

26 U.S.C. § 6501

Type
Toolkit
Jurisdiction
National
Date
2024-12-04
Topic
Tax

Working instruments for state tax residency and multistate nexus. The individual set includes a domicile feasibility screen, a twelve-month change plan, a day log, and a near-and-dear inventory. The audit set includes an evidence index and a response framework. The business set includes a nexus matrix, a threshold monitor, a Public Law 86-272 screen, and a remote employee registration tracker. The computation set includes an apportionment data map and a resident credit worksheet. A trust residency screen and an authority quick reference complete it.

The Domicile Change, Residency Audit, and Multistate Nexus Toolkit

Tax > Residency, Domicile, and State Tax Nexus | Published 4 December 2024 - Updated 12 September 2025 | UpLaw - uplaw.us

How this toolkit is built

Twelve instruments. Bracketed text is for completion.

Three rules organize the set: change the pattern, not the paperwork; track days from day one; and register before collecting.

Tool 1 — Domicile Change Feasibility Screen

Complete before committing. An honest answer here prevents most failures.

Person: [ ] From: [ ] To: [ ] Target year: [ ]

Factor Old state New state Which is stronger?
Primary residence — size, value, character [ ] [ ] [ ]
Will the old residence be sold, leased out, or retained? [ ] — ⚠️
Where will the family live? [ ] [ ] [ ]
Where will minor children attend school? [ ] [ ] [ ]
Projected days per year [ ] [ ] [ ]
Where is work actually performed? [ ] [ ] [ ]
Where are business interests managed? [ ] [ ] [ ]
Where will photographs, heirlooms, and collections be? [ ] [ ] [ ]
Where are the physicians and advisers? [ ] [ ] [ ]
Club and organization memberships [ ] [ ] [ ]

Statutory residence check for the old state ☐ Day threshold: [ ] ☐ Projected days: [ ] ☐ Will a permanent place of abode be retained? ☐ yes ⚠️ ☐ no ☐ If both, the person is a statutory resident regardless of domicile.

Timing ☐ Anticipated income event: [ ] in [year] ☐ Change effective: [ ] ⚠️ must precede the event ☐ Tax at stake: $[ ]

Assessment: ☐ strong ☐ mixed — weakest facts: [ ] ☐ not viable as planned

Tool 2 — Twelve-Month Change Plan

Timing Action Owner Target date Done Evidence
Before Confirm move is genuine; model tax [ ] [ ] ☐ [ ]
Before Decide disposition of old residence [ ] [ ] ☐ [ ]
Month 1 Begin day log [ ] [ ] ☐ log started [ ]
Month 1 Close on new residence; photograph [ ] [ ] ☐ [ ]
Month 1 Move near-and-dear items; photograph in place [ ] [ ] ☐ [ ]
Month 1 Driver's license, vehicle, voter registration [ ] [ ] ☐ dates [ ]
Month 2–3 Physician, dentist, accountant, attorney, adviser [ ] [ ] ☐ first-visit dates [ ]
Month 2–3 Addresses: accounts, insurance, passport, subscriptions [ ] [ ] ☐ [ ]
Month 2–3 File declaration of domicile [ ] [ ] ☐ [ ]
Month 2–3 List, sell, or convert old residence [ ] [ ] ☐ [ ]
Month 4–6 Update estate planning documents to recite new domicile [ ] [ ] ☐ [ ]
Month 4–6 Convert or resign club memberships [ ] [ ] ☐ [ ]
Month 4–6 Move safe deposit box contents [ ] [ ] ☐ [ ]
Month 7–12 Reconcile day log monthly [ ] ongoing ☐ [ ]
At filing Part-year/nonresident old state; resident new state; federal new address [ ] [ ] ☐ [ ]
After ⚠️ Continue the log for the assessment period [ ] ongoing ☐ [ ]

Tool 3 — Day Log Template

Person: [ ] Year: [ ] States tracked: [ ]

Date State (night spent) Partial-day states visited Corroborating record Notes
[ ] [ ] [ ] [flight / hotel / card txn / toll / meeting] [ ]

Rules applied ☐ Any part of a day counts as a day present in [state] ☐ verified ☐ Travel-through exception available? ☐ yes — requires no stop; evidence: [ ] ☐ Hospitalization exception available? ☐ yes — documentation: [ ]

Running totals | State | Days YTD | Threshold | Margin | Alert level | |---|---|---|---|---| | [ ] | [ ] | [ ] | [ ] | ☐ set at [ ] |

☐ Reconciled monthly against card statements and travel records ☐ Backed up off-device ☐ Maintained for spouse separately ☐

⚠️ A log created retroactively at audit carries far less weight than a contemporaneous one — and the auditor is working from the same third-party records.

Tool 4 — Near-and-Dear and Home Inventory

Auditors treat the location of items of sentimental value as a strong indicator of where a person considers home.

Category Item / description Location before Location after Date moved Photograph
Family photographs and albums [ ] [ ] [ ] [ ] ☐
Heirlooms [ ] [ ] [ ] [ ] ☐
Art and collections [ ] [ ] [ ] [ ] ☐
Jewelry [ ] [ ] [ ] [ ] ☐
Pets [ ] [ ] [ ] [ ] ☐
Vehicles [ ] [ ] [ ] [ ] ☐
Safe deposit contents [ ] [ ] [ ] [ ] ☐

Residences | Address | Own/rent | Square feet | Value | Utilities avg | Insurance designation | Status | |---|---|---|---|---|---|---| | [old] | [ ] | [ ] | $[ ] | [ ] | ☐ primary | ☐ sold ☐ leased ☐ retained ⚠️ | | [new] | [ ] | [ ] | $[ ] | [ ] | ☐ primary | ☐ |

☐ Moving company inventory retained ☐ Photographs dated ☐ Utility consumption patterns retained ☐

Tool 5 — Residency Audit Evidence Index

Organize in this order and produce in this order.

1. Time ☐ Day-by-day calendar for each year ☐ Airline/rail/rental records ☐ Hotel folios ☐ Toll statements ☐ Card transactions ☐ Phone location history ☐ Access logs ☐ Passport stamps

2. Homes ☐ Deeds, leases, closing statements ☐ Utility bills each residence ☐ Insurance declarations showing primary designation ☐ Photographs ☐ Property tax bills and exemptions claimed ☐ Sale or conversion records

3. Near and dear ☐ Inventory (Tool 4) ☐ Photographs in place ☐ Moving company records

4. Family ☐ Spouse's residence and employment ☐ Children's school enrollment ☐ Where family gathers

5. Business ☐ Employment agreements and assigned office ☐ Board memberships and meeting locations ☐ Business licenses ☐ Where records are kept

6. Registrations ☐ Driver's license ☐ Vehicle ☐ Voter ☐ Professional ☐ Declaration of domicile — all with dates

7. Professionals ☐ Physician ☐ Dentist ☐ Accountant ☐ Attorney ☐ Adviser — with first-visit dates

8. Affiliations ☐ Clubs ☐ Organizations ☐ Religious congregation — resident or nonresident status

9. Documents ☐ Federal returns by year showing address ☐ All state returns ☐ Estate planning documents and recitals ☐ Passport address

📌 The categories carrying the most weight: homes, time, family, and near-and-dear items.

Tool 6 — Residency Notice Response Framework

Notice received: [ ] State: [ ] Years: [ ] Response due: [ ] Appeal deadline: [ ]

☐ 1. What is asserted? ☐ domicile never changed ☐ statutory residence ☐ both ☐ sourcing of specific income ☐ 2. Exposure computed: tax $[ ] · interest $[ ] · penalties $[ ] · total $[ ] ☐ 3. Were returns filed for each year? ☐ yes ☐ no ⚠️ unfiled years leave the assessment period open indefinitely — compare 26 U.S.C. § 6501 ☐ 4. Day count assembled from records ☐ — result by year: [ ] ☐ 5. Was a permanent place of abode maintained? ☐ yes ⚠️ ☐ no ☐ 6. Strongest favorable facts: [ ] ☐ 7. Weakest facts — address affirmatively: [ ] ☐ 8. Is another state taxing the same income? ☐ yes → resident credit claimed? ☐ → is relief complete? ☐ → Comptroller of the Treasury of Maryland v. Wynne argument available? ☐ ☐ 9. Administrative appeal preserved ☐ filed [ ] ☐ 10. Federal timing analogues noted: deficiency 26 U.S.C. § 6212 · refund claims 26 U.S.C. § 6511 · refund suits 26 U.S.C. § 7422 · timely mailing 26 U.S.C. § 7502 · combat zone 26 U.S.C. § 7508 ☐ 11. Retirement income protected? 4 U.S.C. § 114; definitions 4 U.S.C. § 110, 4 U.S.C. § 124 ☐ 12. Settlement posture: [ ]

Tool 7 — Business Nexus Matrix

Entity: [ ] Period: [ ] Prepared: [ ] Next review: [ ]

State Sales $ Transactions Property Payroll Remote employees Inventory Other in-state activity Sales tax nexus Income tax nexus Registered
[ ] $[ ] [ ] $[ ] $[ ] [ ] ☐ [ ] ☐ ☐ ☐

Standards applied ☐ Sales tax economic nexus after South Dakota v. Wayfair, Inc., which overruled Quill Corp. v. North Dakota ☐ Income tax factor-presence thresholds ☐ Constitutional test — Complete Auto Transit, Inc. v. Brady: substantial nexus · fair apportionment · no discrimination · fair relation ☐ Marketplace facilitator treatment for platform sales — see Online Marketplaces and Third-Party Sellers

⚠️ Register before collecting. Collecting without a permit is a separate and worse problem.

Tool 8 — Threshold Monitor and Voluntary Disclosure Decision

THRESHOLD MONITOR — review monthly | State | Measure | Threshold | Current | % of threshold | Alert at 80% | Action date | |---|---|---|---|---|---|---| | [ ] | sales $ | $[ ] | $[ ] | [ ]% | ☐ | [ ] | | [ ] | transactions | [ ] | [ ] | [ ]% | ☐ | [ ] | | [ ] | payroll | $[ ] | $[ ] | [ ]% | ☐ | [ ] | | [ ] | property | $[ ] | $[ ] | [ ]% | ☐ | [ ] |

☐ Measurement period: ☐ current year ☐ prior year ☐ rolling twelve months — varies by state; confirm each

VOLUNTARY DISCLOSURE DECISION ☐ 1. Obligation missed in: [ ] ☐ 2. Periods affected: [ ] ☐ 3. Estimated tax: $[ ] ☐ 4. ⚠️ Has the state made contact? ☐ yes → voluntary disclosure unavailable ☐ no ☐ 5. Lookback period offered: [ ] ☐ Penalties waived? ☐ Interest? ☐ ☐ 6. Compare to exposure if discovered: $[ ] ☐ 7. Anonymous approach available? ☐ ☐ 8. Decision: ☐ disclose ☐ register prospectively ☐ monitor — approved by [ ] on [ ]

Tool 9 — Public Law 86-272 Screen

State: [ ] Activity reviewed: [ ] Date: [ ]

☐ 1. Is the tax a net income tax? ☐ yes ☐ no → no protection (gross receipts, franchise, margin, and sales taxes are outside it) — 15 U.S.C. § 383 ☐ 2. Is the product tangible personal property? ☐ yes ☐ no → no protection (services, electronically delivered software, and intangibles are outside it) ☐ 3. Are orders sent outside the state for approval? ☐ yes ☐ no ☐ 4. Are orders filled from outside the state? ☐ yes ☐ no ☐ 5. In-state activities — check every one that occurs: ☐ solicitation only ☐ installation ☐ training ☐ repair or maintenance ☐ credit investigation ☐ collections ☐ inventory or consigned stock ☐ office or in-state phone listing ☐ telecommuting employee ☐ in-state application, cookie, or post-sale website assistance ☐ non-sales personnel ☐ 6. Any box beyond "solicitation only" checked? ☐ yes → protection likely lost ☐ 7. Conclusion: ☐ protected under 15 U.S.C. § 381 ☐ not protected — basis: [ ] ☐ 8. Note 15 U.S.C. § 382 on assessment and 15 U.S.C. § 384 separability; and 15 U.S.C. § 391 for the electricity analogue.

⚠️ The protection is far narrower than businesses assume, and it never reaches sales and use tax.

Tool 10 — Remote Employee Registration Tracker

Employee: [ ] Work state: [ ] Start of remote work: [ ] Employer requirement documented? ☐

Obligation Agency Required? Registered Number Notes
Income tax withholding [ ] ☐ [ ] [ ] [ ]
Unemployment insurance [ ] ☐ [ ] [ ] localization-of-work analysis may differ
Workers' compensation [ ] ☐ [ ] [ ] [ ]
Corporate income tax [ ] ☐ [ ] [ ] [ ]
Sales tax [ ] ☐ [ ] [ ] [ ]
Secretary of state [ ] ☐ [ ] [ ] [ ]
Local taxes [ ] ☐ [ ] [ ] [ ]

☐ Employment law review — wage and hour, leave, pay transparency, and notice requirements of the work state — see Remote and Multistate Work ☐ Convenience-of-the-employer rule in the employer's state? ☐ yes → document employer requirement: written policy ☐ assigned office ☐ business necessity ☐ ☐ Reciprocity agreement between the states? ☐ ☐ Classification confirmed — employee, not contractor — see Worker Classification ☐ Policy in place requiring employees to report relocations ☐ Quarterly review of employee work locations ☐

Tool 11 — Apportionment Data Map and Resident Credit Worksheet

APPORTIONMENT DATA MAP | State | Formula | Sourcing for services | Throwback? | Combined reporting? | Data captured? | |---|---|---|---|---|---| | [ ] | ☐ 3-factor ☐ single sales | ☐ market ☐ cost of performance | ☐ | ☐ | ☐ |

☐ Sales captured by destination and customer location from inception ☐ ☐ Sourcing methodology documented and applied consistently — [ ] ☐ Unitary analysis — Container Corp. of America v. Franchise Tax Board · Mobil Oil Corp. v. Commissioner of Taxes of Vt. · Exxon Corp. v. Department of Revenue of Wis. · Allied-Signal, Inc. v. Director, Div. of Taxation · MeadWestvaco Corp. v. Illinois Dep't of Revenue ☐ Alternative apportionment considered? ☐ — basis: [ ] ☐ Factors reconciled to financial statements annually ☐

RESIDENT CREDIT WORKSHEET | Income item | Source state | Tax paid there | Resident state tax on same income | Credit allowed | Unrelieved | |---|---|---|---|---|---| | [ ] | [ ] | $[ ] | $[ ] | $[ ] | $[ ] |

Where the credit fails — check each ☐ Different sourcing rules; each state considers itself the source ☐ ☐ Dual residency — credit limited to income sourced elsewhere, not to income taxed as a resident ☐ ☐ Credit capped at the resident state's rate ☐ ☐ Tax type not recognized — gross receipts, local income, entity-level ☐ ☐ Convenience-of-the-employer rule ☐ ☐ Internal consistency argument available? Comptroller of the Treasury of Maryland v. Wynne ☐ ☐ State entity-level tax adopted in response to 26 U.S.C. § 164 — credit treatment: [ ]

Tool 12 — Trust Residency Screen and Authority Reference

TRUST RESIDENCY SCREEN Trust: [ ] Grantor domicile at creation: [ ] Trustee(s) and location: [ ] Place of administration: [ ] Beneficiary residences: [ ]

State Basis for residency in that state Resident? Tax on undistributed income?
[ ] ☐ grantor ☐ trustee ☐ administration ☐ beneficiary ☐ ☐

☐ Beneficiary-only basis asserted? → North Carolina Department of Revenue v. Kimberley Rice Kaestner 1992 Family Trust: presence of in-state beneficiaries alone, with no distributions, no right to demand, and no certainty of receipt, is insufficient. ☐ Planning levers: trustee location [ ] · situs in the instrument [ ] · where administration actually occurs [ ] · change of trustee or situs available? ☐ ☐ Multiple-state residency? ☐ yes — credits available? ☐ complete? ☐ ☐ See Trust Administration and Wills, Trusts, and Probate

AUTHORITY QUICK REFERENCE ☐ Federal-area and employee taxation: 4 U.S.C. § 110 · § 111 · § 113 · § 114 · § 124 ☐ Net income tax limitation: 15 U.S.C. § 381 · § 382 · § 383 · § 384 · § 391 ☐ Federal residency and status: 26 U.S.C. § 7701 · § 871 · § 911 · § 6114 · § 2 · § 63 · § 6013 · § 152 ☐ Deductions and exclusions: 26 U.S.C. § 121 · § 162 · § 164 ☐ Procedure: 26 U.S.C. § 6212 · § 6501 · § 6511 · § 7422 · § 7502 · § 7508 ☐ Cases: Complete Auto · Quill · Wayfair · Wynne · Kaestner · Container Corp. · Mobil Oil · Exxon · Allied-Signal · MeadWestvaco

📌 The three rules again: change the pattern, not the paperwork; track days from day one; and register before collecting.

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