Georgia stated an employee’s temporary working location would not void an employer’s Public Law 86-272 protection as long as the temporary location remains an “official work from home order issued by an applicable federal, state, or local government unit.” These states have provided COVID-19 nexus relief and noted that the state’s tax departments would not use an employee’s temporary location to determine BAT nexus in that state. Much like state withholding taxes, some states have discovered potential implications of teleworking employees on business taxpayers. Generally, if an employee’s work location is indeed temporary, income tax/BAT nexus may not be created. As COVID-19’s shelter-in-place orders see some employees approaching 10-plus weeks away from their offices, companies are left to decide which jurisdictions they have income tax/BAT nexus in and if they’ll need to file any more 2020 state/city tax returns because of remote employees. Other states argued 10 days was more effective. Certain states elaborated on “physical presence”, saying an employee had to be present in the city/state for more than seven days to create a physical presence nexus. However, what happens when employees work within a state they have not before? Does an employee’s inability to travel to their usual office introduce income tax/BAT nexus in their new place of work?īefore the pandemic, many states held a firm stance of businesses having one employee working in another state (even for a day) to be subject to a state’s business tax. Many states have an economic nexus rule or set thresholds, but whether or not a state has a nexus standard, an employee’s physical presence may establish income tax/BAT nexus. Income tax and BAT nexus are established by physical presence and/or economic nexus. If an employee does not return to work and continues working remotely, then they may be subject to state tax withholding in their respective city and/or state. As long as the employee’s remote work location is due to COVID-19 and is temporary, states will not impose withholding requirements. However, given the long list of unprecedented events that have arisen from the pandemic, states have offered COVID-19 guidance for this situation. Most states have not issued withholding requirements for how long an employee must have worked away from their state. There isn’t a set timeframe in which employers are recommended to take action, unfortunately. With the COVID-19 pandemic’s increased need for employees to work remotely, employers may need to register with their employees’ respective states and withhold payroll taxes on wages. This agreement allows residents in neighboring states to not have to file and pay income taxes on wages earned in the working state. For example, an exception to this rule is a reciprocal agreement between an employee’s home state and work state. Since state income tax withholding is necessary for the state an employee provides services and not the state where the employee resides, remote work may cause a few complications. Employee Wages – State Income Tax Withholding From a tax perspective, remote employees may impact employers’ state income tax withholding, income and business activity tax (BAT) nexus, and sales and use tax nexus. How are employers impacted when they have jumped from a full office to an entirely virtual workplace? The answer isn’t so cut and dry. With uncertainty on the duration of remote work for most people, employers have concerns. As shelter-in-place orders remain for employees across the United States, many businesses continue to grapple with working remotely.
0 Comments
Leave a Reply. |