As @tengineer1 stated, we are transportation workers in the business of Interstate (& International) transport. The same as railway, trucking, or airlines moving goods across various states. Our wages are taxed in our home state. If you worked in only one state, for example, NCL’s Pride of America, you would be taxed by Hawaii in addition to your home state.
Generally speaking, if you pay taxes in a state other than your home state, you will get a tax credit for the amount paid in your home state.
Suppose that you live in Massachusetts, but own a summer camp in Maine, and a winter home in Florida. This is quite common. Now suppose that you also own a condo in Punta Cana, DR. You rent these properties on Air BnB when you are not using them which gives you income in each jurisdiction. You will owe Federal Income tax on all of this income. You will also owe state tax to each state on your income derived in that state. (I don’t know about the DR). Massachusetts (your state of residence) will claim that you owe taxes to them on all of this income, however, you can claim a tax credit for the tax that you pay on your camp in Maine. Since Florida (and possibly the DR) do not have an income tax, you won’t be able to claim any tax credit on your Mass income tax. You will end up paying Mass tax on your Florida and DR income.
If you have wages withheld in California, California may claim that it is also entitled to tax on your out of state wages and investment income.
If you have some money, and you are willing to spend some of it on good lawyers and accountants, and you are highly organized and business like, you can structure your property ownership so that you pay no state tax in your home state on your out of state property. This comes with transaction costs that may or may not be worth the effort and expense depending upon how much income you have.
Some states tax highly compensated executives, sports stars, and celebrities on wages earned in their state. You get paid millions to work on a Hollywood movie, then California wants tax on that. Part of the movie was filmed in Ny and NJ, they may want tax too. Imagine a ball player earning a million a game and playing in numerous states. Some of them want state income tax on each game played in their state. The home state wants tax on all of it. This is why they have managers, accountants and lawyers.
Normally, under federal law, a Mariner can only be legally taxed on his income in his home state. Some states, especially California don’t care and are happy to violate this law. There are some exceptions if the work is entirely performed in one state. For example running a ship assist tug or a bunker boat in LA/LB may lawfully subject you to California state tax on that income, even if you live in Seattle.
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If I lived in California I wouldn’t try to move to any island in the Pacific or Asia to quit paying California state income tax because California doesn’t care. I’d sign the cheapest 6 month lease that I could find in Texas or Nevada to follow in the footsteps of the other hundreds of thousands fleeing to those states. Find the cheapest 1 room efficiency that you can get just for a DL & voters card & cancel everything in California. Make a clean, easy break with California THEN go follow a more complicated plan to pay less in federal income tax.
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Could I just get one of the mailbox / address services in South Dakota (for example), right before I relocate to the PI? Or should I physically be in a tax-free state for some months, as you’ve said?
Thank you for the detailed information!
First thing, don’t take any tax, life, career or any other type of advice from me serious. All I do is tell sea stories I say what I think I would do in similar situations.
If it was me, I’d get one tax season away from California in hope’s they would forget about me. I would also read the 18th comment in the following thread by @RC.Joe because it seemed like he did a lot of research & had a lot of links about beating taxes & living out of the US.
No. You shouldn’t do that. Several reasons.
Residency generally requires an intent to reside, actions to that end and a time requirement. The state you’re “moving” to may have other requirements. Check with the state.
A real address is usually required to get things like a drivers license, voter registration and other proof-of-residence documentation.
You want that proof of residence because, sooner or later, a state will come for you demanding back taxes or proof of alternate residency. A mailbox rental agreement won’t cut it and you will owe not only the back taxes but all the penalties and interest that goes with it in addition to the lawyer and accountant costs. Small gain now, big loss later.
Look into property in a tax haven state with low property tax. Then look for a cheap single-family unit with few neighbors. Buy it. That’s your new legal residence. You don’t have to actually live there. (Don’t buy a property condemned for meth manufacture. You may get stuck with clean-up costs.) Move every piece of paperwork there i.e. drivers license, car insurance, cell phone bill, credit card address…everything. Open a bank account. Change your Social Security address to there. Pay your property tax. Do what a normal person would do if they moved. Then a year or so later, move to the PI (or where ever). Small loss now, no loss later.
(P.S. Don’t use Alaska or Florida.)
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I know you know this, but just incase other readers don’t know it: this only works for shipping, rail, truck and air crew. If you also have income in a state that is not ship/rail/road/air then you pay tax to that state it was earned. So rental income, capital gains and all that are not exempt.
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Of course, only a Mariner’s wages while working as a Mariner on vessels engaged in International or interstate trade are exempt from state tax, other than in the state of residence.
If the OP lives in Guam, that’s the “state” where he should be taxed on his Mariner wage income.
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I worked for a California based company while living in Florida back in the 80s. Didn’t do much work in CA, but for a couple of days. Most of the time was running barges up and down the coast from Washington. When I got my paycheck, I see that they withheld California State Taxes. Well, come tax time, I found that I couldn’t get it back and I had to file for a refund. Using their calculations, I came up with a refund of less than a dollar. I was pretty pissed off. At the time, my late father worked for the California Franchise Tax Board, the government entity that controls state taxes. He told me that I had no recourse. The way the law was structured at the time (and my still be) is that because the company was based in CA (and their paychecks were issued from CA), I was liable to pay CA taxes for the time period that I worked for them. Oh, and even though most of my work with other companies was outside of CA, my CA tax liability was calculated by the ratio of my wages earned in CA compared to all of my wages. . . what? As far as not paying state taxes, he had some other advice for me. Over a different time period, I lived in a state that had state income taxes, but my paychecks came from a state that did not. There was no withholding. Well, after a few years, I got a love letter from my state of residency at the time (not CA) that I owed some coin for back taxes. . . his advice for me? State tax laws do not cross state borders. . . . although there are pressures that some states can place, and there are also some states that have reciprocity. So, I booked it to another income tax free state. . . . .
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42 States with a state income tax hate the states without income tax. If you “move” to one of those states they assume it’s tax evasion. You have to prove it isn’t.
If you move, rent a room in a house or condo get rent receipts, get some utility in your name (probably a telephone land line, keeps some stuff in your room, stay there some, get a drivers license, register your cars , get the post office sending your mail there, etc etc. if you have any ties to your old state, property , cars, etc. put them into an LLC. Don’t own anything in your name in your old high tax state.
A Mariner friend claimed residence in Florida where he owned a house. He had a car registered there, got mail there, had a Florida drivers license, stayed there a couple months per year, etc etc. However, his wife and kids lived in his house in Maine. The kids were in school. He “visited “ his wife and kids in Maine about four months a year. Maine demanded that he pay Maine income tax. He fought it and lost. The court essentially ruled that if you are married with kids, you live where your kids go to school.
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Over the years I heard stories from shipmates who said the states of Maine, Massachusetts, Maryland, New York, Mississippi, Louisiana (me included) & California went after them unjustly (or with reason?) for state income taxes. I don’t think any of those states are going to make any exemptions or special rules for mariners. 100% clean break would be the only way to go I assume.
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Or pay your taxes. It may be cheaper in the long run, 
At one point Maine got the graduate list from Maine Maritime Academy and went after everyone that had graduated within about a 10 year period. Maine took the position that if you graduated from the academy they assumed you are a Maine resident. They actually prosecuted quite a few guys and their wives for tax evasion. Maine isn’t as bad as California but it’s a good state to stay away from unless you want to pay high state taxes for nothing.
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Sure, but not to a state in which I do not live or own property…
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Most reasonable people agree with that. But where at & how much lies the issue.
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An almost exact scenario, almost sounds like twins. Engineer from Maine Maritime, bought a condo in Florida, and “visited Maine” for years… He fought Maine for many years, ended up on the short end after a long protracted challenge. Having homes in both places did not help his case. Felt bad for him. On a better note, a few shipmates lived in Florida and moved to Tennessee, another no state tax state but much less expensive property in most cases… Not sure if they retained property in Florida afterwards, but no tax issues.
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I’m no big fan of taxes but I can’t really blame the Maine bureaucrats who said a mariner who “visited” Maine 4 months a year, lived in a vacation house in Florida for 2 & worked 6 months on ship had to pay Maine state income taxes. Especially with his wife & kids in Maine full time except maybe for the 2 months when they were on vacation in Florida. What type of people did that guy think he was trying to fool? I hope the OP is smarter than that with any potential future battles with the CA IRS.
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Why?
That’s weird, all I had to do was say that I worked offshore in the middle of the gulf and I never heard back from them again. I was prepared to get a statement from my company but didn’t even need that.
He doesn’t live / hasn’t lived there, he works for a company based out of there.