This is the written explanation from the tax company that our company references to. (it is a very well known international tax management company);
I apologize for the delay in sending this over to you. The information I was referencing over the phone included the following (please note that I have paraphrased the items below):
- International flights would be exempt from reporting income in the U.S. However, per Article III(1)(h) of the Canada-U.S. Income Tax Convention, a trip that is entirely within one country is not an international trip.
- Article XV(3) of the same convention states that earnings by a resident of one country in respect to employment on an aircraft is only taxable in their country. That is why the income you would be considered to earn in the U.S. isn’t taxable there.
- However, to claim a treaty position, a return would need to be filed to report said treaty based position (per Sec. 6114 of the Internal Revenue Code).