There’s been a political firestorm over oil pipeline construction in the United States. That’s been the case with the Dakota Access Pipeline construction in North Dakota. I’ll ignore the politics of whether or not the pipeline should be built. (If you’re interested, you can find plenty of literature on that subject.) I’ll stick to taxes, thank you.
But one thing that is true regarding the Dakota Access pipeline protests: Paid protesters were brought in. Ryan Rauschenberger read about those paid protesters and had a thought: Shouldn’t those paid protesters be paying state income tax to North Dakota? After all, the protests were in North Dakota, the work was conducted in North Dakota, and there’s definite nexus to the state. Mr. Rauschenberger is more able than others to make sure that those taxes flow to the Peace Garden State; he’s the Tax Commissioner of the state.
“If an organization is directly paying someone to come and do activities on their behalf, even protesting — if they’re receiving income and they’re here in North Dakota performing activities for an organization, they owe income tax from Day One,” Mr. Rauschenberger said. “And that entity should be issuing 1099s. Just like a contractor…
“I think a lot of people think that, ‘Oh, if something goes through GoFundMe, it’s just always considered a gift.’ But it can also be used as a way to funnel money just like an employer paying a contractor,” Mr. Rauschenberger said. “It can be a way to funnel money as well, and very well could be taxable. I’m not saying it is. I’m saying it could be. And it’s really on a case-by-case basis.”
It’s not likely that the North Dakota Office of State Tax Commissioner will go after individual protesters (unless they receive a W-2 or 1099 and don’t file); the office has a staff of only 128. However, it’s far more likely the state will go after organizations that paid for protesters; the state will get more bang for the buck there. So if you were paying protesters in North Dakota, make sure you file those 1099s and send a copy to Bismarck.