Do I owe California tax on options granted in Washington?

September 30, 2011

Date:   30 Jan 2009
From:   Richard

I received company options while working for a company in the state of Washington. My company was bought by a California company, which offered me a position in California. After two years, I left California, bought a house in Washington and registered to vote. My company withheld California state taxes. We petitioned in submitting our return and were given back income taxes paid for 2004. Over the last six months, the Franchise Tax Board is asking for a portion of that money back plus interest.

Am I responsible for paying this? None of the options exercised were granted in California.


Date:   5 Feb 2009

Hello Richard,

Some of the option income is probably taxable in California. Even though the options were granted, you continued working for the company for a period of time in California. See Franchise Tax Board Publication 1004, Stock Option Guidelines. The web site is

If you need additional support on a fee basis, let me know.

Good luck!

Mike Gray

For more information about non-qualified stock options, request our free report, “Executive Tax and Financial Planning For Non-Qualified Stock Options”.

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