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Some cities charge income tax based on where you live, others based on where you perform your work, others based on your business address, and so on. It's entirely possible the request you received is in error but you'll need to show them why it's in error. The case basically boils down to what the laws are.
If you can't figure out the details yourself, you should hire an attorney. It may cost you more overall, but you need to do it. At least the legal fees are a deductible cost of doing business. If you do understand the laws, then you can try responding to the city's request yourself, explaining the residential and business circumstances for which you feel you're exempt from their tax jurisdiction. It sounds like you probably don't fully understand them at this point.
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