State Taxes and Mariners

24
by on February 28, 2011 at 3:11 pm

Suz asked this question

So, what about if you live in one state (TN) and work as a merchant mariner in another state (HI), 45 days on/45 days off rotation? Do you pay HI state taxes, or does the payroll clerk change your home state to TN, which has no state income tax? This will be my fiance’s issue next year as we are moving from Hawaii to Tennessee, but he will be commuting for his pull. Also, would travel expenses to and from HI be a deductible expense? I’ve looked at IRS publication 463 and it was a bit confusing. I’m hoping for a little clarification.

It’s going to be impossible to figure this one out via IRS publications. The problem is that we’re dealing with State law and the applicability of Title 46. Section 11108 says the following.

(a) Withholding.– Wages due or accruing to a master or seaman on a vessel in the foreign, coastwise, intercoastal, interstate, or noncontiguous trade or an individual employed on a fishing vessel or any fish processing vessel may not be withheld under the tax laws of a State or a political subdivision of a State. However, this section does not prohibit withholding wages of a seaman on a vessel in the coastwise trade between ports in the same State if the withholding is under a voluntary agreement between the seaman and the employer of the seaman.

(b) Liability.–

(1) Limitation on jurisdiction to tax.– An individual to whom this subsection applies is not subject to the income tax laws of a State or political subdivision of a State, other than the State and political subdivision in which the individual resides, with respect to compensation for the performance of duties described in paragraph (2).

(2) Application.– This subsection applies to an individual–

(A) engaged on a vessel to perform assigned duties in more than one State as a pilot licensed under section 7101 of this title or licensed or authorized under the laws of a State; or
(B) who performs regularly-assigned duties while engaged as a master, officer, or crewman on a vessel operating on the navigable waters of more than one State.

Does this mean I don’t pay State taxes?

Unfortunately no. In this case it appears as though the mariner works in and around Hawaii. This doesn’t qualify as a foreign voyage. Meaning the mariner would file as a non-resident in Hawaii and receive a credit for taxes paid in their state of residency. The key term is INTERSTATE.

 

JM

24 Comments

  • Billy K. Parrish

    05/01/2012

    I hold a Master of towing vessels western rivers, I work for the Tennessee Valley Authority Operating tow boats across the Tn. Valley. I live in Tennessee and my checks come out of Knoxville Tn.My home office is in Al. but i work on the Tn., Ohio, Miss. rivers do i have to pay state taxes to Al.?

    • admin

      06/01/2012

      Sounds like you do not. First, your actual work is performed in other States. (Although Walmart has corporate offices in Washington a person who is employed in the New York store only pays New York). It also appears that your vessel is engaged in interstate commerce. If that is indeed the case you’re liable in your State of residence….

    • admin

      07/01/2012

      Thanks for the feedback …

  • C

    25/01/2012

    If you had state (PA) taxes withheld by your employer, but your vessel was involved in interstate commerce, and you are a resident of a different state, how do you get the state tax refunded? This doesn’t seem to be an option on any tax forms.

    • admin

      31/01/2012

      If you qualify, you would file a non-resident return in PA. You would say adjust your income for the amount attributable in PA.

      Keep in mind though – If your State of residence has an income tax, you would receive credit for most or all of the taxes paid to PA.

      That can make things easier as PA would most likely deny a claim for refund like that on initial filing.

  • richard combs

    31/01/2012

    so your saying a merchant marine can file just like everyone else same deductions e file no problem no extra paper trip you have to send in ,the person thats done my taxes for years just passed away so iam thinking about just doing them my self,the per demim yes no ?

    • admin

      31/01/2012

      The per diems are allowed. They’re quite often overstated and misinterpreted however. You should retain paperwork and supporting documentation. You are not required to submit it. That was b.s. started by a few competitor firms. Most have changed their ways at this point…

    • Gustavo

      26/04/2012

      Yes, on your Schedule A, which means you would need to itemize to revecie the deduction. If you don’t itemize, your standard deduction might be greater than your itemized deductions. You may want to contact a tax professional for your state taxes, as there are additional schedules you will need to file for the tax paid, as well as resident and nonresident state tax returns.

  • Christine Gleason

    23/02/2012

    My husband works for an ocean going company out of Massachusetts full time and they do not withhold state takes (even though an equal amount of time is spent on land teaching and sailing offshore). We held partial residency is Maine and Virginia this year and worked but were non-residents in South Carolina. Can Maine claim state taxes for the entire years earning or just the portion earned while living there?

    • admin

      25/02/2012

      If you’re a part year resident, you’re liable for the gross income earned (everywhere) during that period of residency. If you’re a non resident you’re liable for income earned only in that State. You receive a credit for taxes paid as a non resident in your State of residency. As for teaching…. If it was in Massachusetts, technically that’s non resident income as he wasn’t engaged on a vessel in foreign or interstate commerce.

  • D. Kelly

    25/02/2012

    My son graduated from an Academy last summer and has job with a company based out of LA. The ship he’s on travels exclusively in the Gulf. He is a resident of Massachusetts. His paycheck had no state withholding (neither LA nor MA). Does he have to file in LA? Or just his state of residency (MA)?

    • admin

      01/03/2012

      If you look at my recent post you’ll see that opinions on this may be shifting. If the company is reporting LA wages, (not withholding taxes), you might be well off to file as a LA non resident and take the credit in Massachusetts. Shouldn’t cost more and could save on future headaches.

  • Beth Underhill

    27/02/2012

    We live in Massachusetts. My husband works on a container ship that leaves Tacoma and makes stops in Alaska and returns to Tacoma. His employer does not withhold any state taxes (we pay quarterly estimate to Mass). We are not supposed to be paying/receiving credit from any other state, correct?

    • admin

      01/03/2012

      As of right now, you should be good. Additionally Washington and Alaska don’t have a State income tax.

  • ma gracia ferrer

    29/02/2012

    my husband is a merchant marine, we are a resident of Hawaii. he does not have state withholding tax, what state tax form should we use. we will file married filing joint .

    • admin

      01/03/2012

      Definitely Hawaii. Perhaps the State he is working in as well (depending on the type of work).

  • S. Mayo

    02/03/2012

    My husband is a merchant marine and work 28 on 28 off. I want to do our taxes this year. How do I find out what the daily credit for days at sea are? I already have his days at sea from his work.

    • admin

      17/03/2012

      Credit is a subjective comment. There are several articles here that assist in outlining deductible expenses. Remember…. There are no tax credits for mariners :)

  • monique

    10/04/2012

    o.k., still a bit confused about state taxes…my husband is a towboat captain working for a company out of houston, tx – he has been working anywhere from 1 week on, 1 off to 3 months on 1 or 2 weeks off he goes from houston to mobile, al; up the mississippi; corpus cristi… basically everywhere and anywhere. we moved to alabama about a year ago and were just told that we need to pay state taxes in alabama. my understanding from reading the previous posts is that he is NOT subject to pay the state income tax. PLEASE HELP!!!!

  • Danielle

    26/04/2012

    If you itemize (see if your itzeiemd deductions on 1040, Schedule A exceed your standard deduction, which is $10,700 for married filing joint, $7850 for head of household, $5350 for single or married filing separate in ’07), you may deduct EITHER state and local income taxes OR your state and local general sales taxes. You cannot deduct both. You make your election on line 5 of Schedule A by checking box a for income taxes or box b for general sales taxes. The option to claim sales taxes instead of income taxes will not be allowed following 2007 unless Congress extends the law permitting this option.

  • Melissa Brown

    31/01/2013

    Hi, My husband lives in Arkansas, which has a state tax but is employed in Tn which does not. He works on the river barges. He report to Memphis but once he is on the boat then he travels the mississippi so he is several states. There were no state taxes held out from TN. Will he be held liable to AR state tax? We were told by a friend that he would not because he is considered a maritime worker. If that is the case the how would I explain that to my tax preparer.

  • Adrian

    08/03/2013

    I work for the Alaska state ferries, and my ship is temporarily at a ship yard in Portland Oregon. There’s no state tax in alaska, the vessel is normally in service in Alaska. The ship is only in Oregon for repairs then back to alaska. But the state of alaska is taking out Oregon taxes while I work on the state of alaska vessel in Portland. Is this right

  • kelly crace

    11/03/2013

    I live in Hawaii and work on a rig in the gulf, 28/28 rotation, spending only 25 out 56 days in Hawaii. Last year as best I could tell researching there seemed to be no way around it- I was liable as much as any full time resident because it’s my primary domicile as defined in Hawaii statutes. Does this sound correct or is there some break I am missing here? Thanks

  • admin

    03/02/2012

    The issue is a lack of interstate action. Difficult to demonstrate residency on a rig. Seems that if anything you’d be a non resident in the state of engagement.

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