General State Tax Principles

Here are some general rules (forgive the lack of specifics, but many more facts are required before a valid opinion could offered):

Legal Entity - If you operate as a general partnership or sole proprietor (with no separate legal entity), you will only be subject to tax based on where you have nexus (discussed later).

State of Incorporation/Formation - Generally, at a minimum, you will pay an annual fee to this jurisdiction (I believe that both Delaware and Nevada treat LLC's this way). Typically, these fees are published on the state's website. Many states will also apply a tax on gross revenue or outstanding shares or some other metric. This often varies depending on the entity type (C,S, LLC, etc.).

Nexus (when you become subject to state tax) - Technically, within any state which you are deemed to have nexus, you will be subject to tax and may also be required to "qualify" for doing business in that state. Taxes can include sales, use and income tax. Nexus definitions will vary between states, can get fairly technical and often require use of a legislated formula to allocate profits among the qualifying jurisdictions (don't forget local taxes levied by municipalities), so you should definitely consult with a professional. Otherwise, you risk getting picked up on the radar of the State Revenue Dept. and could be subject to audit, fines and possibly even criminal fraud charges.

I've probably left a lot out, but a competent CPA should be able to advise you on the specific issues... Good luck!

Side Note: State tax compliance is a messy process, so support efforts by politicians to harmonize state laws. The federal government does have the right to regulate interstate commerce, but little has been done to ease the administrative burden on small businesses. This article goes more in depth on how e-commerce is affected by the commerce clause .

Generally, you pay taxes where the business is located. So, for example, if you were located in and did business in Texas, the tax would be paid in Texas.

The situation becomes trickier because the business is in TX, but you are performing the "work" from Wisconsin. So the question becomes, how essential is what you do to the running of the business? If the business couldn't operate without you, then Wisconsin will argue that your money is "Wisconsin Sourced Income" which means it will be taxed in Wisconsin. Moreover, if your wages get put into a Wisconsin bank account, Wisconsin will also have a good argument that you should be taxed there.

Texas has a Tax on LLCs as a business tax even though there is no personal income tax so you'll have to pay that as well.

For the Mexican citizen, he is subject to what the IRS calls "Foreign Partner Withholding Rules" which state that anytime you have a member of an LLC who is not a US citizen, you need to withhold tax from his wages and pay it over to the IRS before you pay him directly. Some states have similar rules and enforce it fairly strictly so you should begin to withhold from his wages and pay it over to the government before you pay him.

This is just an overview but you should really seek the guidance of a tax professional to work out your situation in full.

Note: This is not legal advice and does not form an attorney-client relationship.