Treating clients in multiple states just got easier. Our guide helps you understand what it means for your taxes.
According to Heard's 2025 Financial State of Private Practice Report, multi-state practice is now the norm, not the exception.
In a given tax year, your practice may need to file income tax in multiple states if:
Multi-state tax filing adds complexity to the financial side of your practice, but a firm grounding in the basics makes it easier to tackle.
By the end of this guide, you'll be able to:
Each state has its own licensing board for therapists. You must be licensed to practice in a state in order to provide therapy there. That applies to both remote and in-person therapy.
You must be licensed in each state where your clients are located, regardless of where you live or where your business is registered. Providing therapy in a state where you are not licensed can have serious professional, legal, and financial repercussions.
states have passed legislation to join
The Counseling Compact is administered by the American Counseling Association (ACA) for Licensed Professional Counselors (LPCs) or their equivalent.
By joining the Compact, you can provide therapy in member states. This saves you the time and effort needed to obtain licenses from different state boards.
You must have a valid license in the state where your practice is based. Thirty-nine states have passed legislation to join the Compact, and the list is growing. Only a few of the Compact states are currently issuing privileges.
member states, with more in progress
Administered by the Psychology Inter-jurisdictional Compact Commission, PSYPACT is for licensed psychologists. PSYPACT has 42 member states, and more are in the process of introducing legislation.
Joining PSYPACT can allow you to practice across state lines without being individually licensed by different boards.
When you trigger income tax nexus in a state, the state's tax authority requires you to pay tax on income earned there. The state considers you a "foreign entity," a business registered outside the state. Income tax nexus exists to ensure foreign entities pay their share of state income tax.
Each state has its own triggers for income tax nexus. Generally, the following apply:
For example: if you earn 25% of your revenue from clients in New York and 75% from clients in California, you owe tax on 25% of your total income in New York and 75% in California.
While triggers for income tax nexus vary from state to state, all states' rules fall into one of three categories:
The MTC sets thresholds for triggering nexus. Many states use some variation on these thresholds for their nexus rules.
States may set their own thresholds for triggering nexus.
This is the default. The Act applies unless the state specifies otherwise. In this case, assume you owe tax on any income earned in the state.
Because the MTC model is used by many states, it's worth understanding how it works. Under the MTC model, nexus is triggered based on income tax factor presence nexus, a term for standard thresholds set by the MTC.
The standard MTC thresholds are:
Or 25% of your total property, payroll, or sales in the state.
If your business crosses any of these thresholds, it triggers tax nexus. For smaller practices, those without employees or property held in multiple states, the most important threshold is 25% of revenue. Even if your revenue is relatively small, you can trigger nexus. For instance, a part-time practice with revenue of $20,000 could trigger nexus by charging clients in a particular state a total of $5,000 over the course of the year.
Be careful researching income tax nexus. Many states use the MTC model with variations, meaning different thresholds than the default. And states that set their own nexus rules may impose thresholds significantly different from the MTC model. When in doubt, contact state tax authorities directly to determine the thresholds for nexus. You can also consult with an accountant based in the relevant state to confirm that you trigger nexus.
In addition to income tax nexus, each state that charges sales tax has a sales tax nexus. Sales tax nexus is different from income tax nexus. They are two different taxes with two different nexuses.
Most importantly:
Keep an eye on the terminology. Many resources online use "tax nexus" interchangeably for sales tax and income tax nexuses. Third-party filing services, and even some state tax authorities, may use these terms interchangeably. If you're researching income tax nexus for a particular state, make certain that any information you use explicitly applies to income tax.
If you intend to see clients in additional states and you are not a sole proprietor, you may be required to register for foreign qualification there. Each state has its own definition of doing business. The best way to find out whether you need to register for foreign qualification in a particular state is to consult with your incorporating agent or contact the Secretary of State's office.
Allows you to legally operate in the state and pay taxes there.
Makes details about your business entity publicly available to state residents.
As part of the application process, you may need to provide a Certificate of Good Standing issued by your home state.
Even 1099 contractors need it
If your practice is a registered LLC or PLLC, you must apply for foreign qualification in any state where you qualify as doing business, even if you're working as a 1099 contractor. That applies if you're contracting with a practice based in the state.
To determine in which states you need to file and pay income tax, follow these five steps.
You can get the data you need from your EHR or booking software, combined with bookkeeping records. Organized bookkeeping is essential for accurately filing both state and federal taxes.
Step two becomes more complex if your business owns property or employs workers in other states. Each state has clear thresholds for property ownership and payroll. These apply even if you do not cross the threshold for sales.
The particular process for filing and paying state taxes varies by state. Each state has its own tax forms, payment methods, and online portal.
The next section includes state tax filing instructions for a sample of five states. To access step-by-step filing instructions for every state, check out Heard's resource How to Pay Income Tax in Every State as a Therapist.
If you expect to owe $1,000 or more in federal taxes, the IRS requires you to file and pay quarterly estimated taxes. Individual states have their own thresholds and filing requirements for quarterly estimated taxes. In most cases, the filing dates for these match up with the federal quarterly estimated tax deadlines.
These examples are meant to give you a sense of the income tax nexus thresholds in different states. For a complete list of requirements for each state, check out The Multi-State Tax Guide for Therapists. For a complete state-by-state guide to filing taxes, see How to Pay Income Tax in Every State as a Therapist.
California uses the factor presence nexus standard. If your practice meets any of the following qualifications, you are legally required to file and pay state income tax in California:
Registering for foreign qualification in California is the easiest way to practice there legally. The time required and the cost to register your LLC for foreign qualification in California are:
| Processing | Time | Cost |
|---|---|---|
| Standard | 3 to 5 business days | $70 |
| Expedited | One business day | $420 |
To complete your application and pay associated fees, visit California Bizfile Online.
If you treat clients in New York, you most likely trigger nexus in the state, meaning you're required to file and pay income tax there.
Registering for foreign qualification in New York is the easiest way to practice there legally. The time required and the cost to register your LLC for foreign qualification in New York are:
| Processing | Time | Cost |
|---|---|---|
| Standard | One week | $280 |
| Expedited | One to two business days | $490 |
To complete your application and pay associated fees, visit the New York Department of State.
Texas does not collect state income tax, but you may still need to register for foreign qualification to practice there.
Registering for foreign qualification in Texas is the easiest way to practice there legally. The time required and the cost to register your LLC for foreign qualification in Texas are:
| Processing | Time | Cost |
|---|---|---|
| Standard | One week | $750 |
To complete your application and pay associated fees, visit the Texas Secretary of State.
Ohio uses the factor presence nexus standard. If your practice meets any of the following qualifications, you are legally required to file and pay state income tax in Ohio:
Registering for foreign qualification in Ohio is the easiest way to practice there legally. The time required and the cost to register your LLC for foreign qualification in Ohio are:
| Processing | Time | Cost |
|---|---|---|
| Standard | 2 to 3 business days | $99 |
To complete your application and pay associated fees, visit the Ohio Secretary of State.
D.C. does not provide hard-and-fast rules for determining income tax nexus if you are a remote therapist. Based on the MTC's most recent interpretations of P.L. 86-272 (the Interstate Income Act of 1959), if you serve therapy clients in D.C. and earn revenue by doing so, you likely owe state income tax on those earnings. For more information, consult with a CPA or commercial lawyer familiar with the local tax code.
Registering for foreign qualification in the District of Columbia is the easiest way to practice there legally. The time required and the cost to register your LLC for foreign qualification in the District of Columbia are:
| Processing | Time | Cost |
|---|---|---|
| Standard | 2 to 3 business weeks | $220 |
| Expedited | One week | $270 |
| Rush | 2 business days | $320 |
To complete your application and pay associated fees, visit DC CorpOnline.
Before seeing clients in a new state, make sure you're licensed to practice there and register your business for foreign qualification. Then review the state's income tax nexus rules to determine whether you'll owe taxes. Good bookkeeping is the most powerful tool in your kit. Use it to track when and where you earn revenue so filing state taxes is a breeze.
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