In which state do out-of-state employees pay income tax?
If an employee lives in one state and works in another, they will be paying resident taxes to their home state and non-resident taxes to the state in which they work. For example, if the company is located in New York, while the employee lives and works in St. Loius, then the employee will likely have to file as a non-resident in New York and a resident in Missouri.
As an individual filing a multi-state tax return, the first important step is making sure that the federal tax return is correctly filed. Any misinformation in the federal return will affect the state returns.
The next step is to file the state returns. Tax laws may vary from state to state, so be sure to consult a tax professional if unfamiliar with state tax laws. Finally, be sure to file a-credit for taxes paid to another state, or else risk being over-taxed on the work performed outside of the employee's home state.
Note** This is a tax-related question. It is best to check with tax professionals before filing taxes, or taking action related to tax questions.