49 U.S.C. § 14503 — Withholding State and local income tax by certain carriers

(a) Single State Tax Withholding — (1) In general: None of the pay a motor carrier, or motor private carrier, gives to an employee who regularly works in two or more states operating a motor vehicle can be taxed by any state or subdivision's income tax laws, except the state or subdivision where the employee lives. (2) Employee defined: "Employee" here has the same meaning as in section 31132. (b) Special Rules — (1) Calculation of earnings: An employee is treated as earning more than 50% of their pay in a state or subdivision if they spent more than 50% of their total working time there. (2) Water carriers: A water carrier providing federally regulated transportation must file income tax information returns and reports only with (A) the state and subdivision where the employee lives, and (B) the state and subdivision where the employee earned more than 50% of their pay from the carrier during the prior calendar year. (3) Applicability to sailors: This subsection covers pay for a master, officer, or sailor who's a crew member on a vessel in foreign, coastwise, intercoastal, or noncontiguous trade, or in the fisheries of the United States. (c) Filing of Information — A motor carrier or motor private carrier that withholds pay under (a) must file income tax information returns and other reports only with the state and subdivision where the employee lives.