Business Tax Implications for Remote workers.
For years, many industries with employees working around the US territory have been dealing with the implications that generate employees in different states, however, after the pandemic hit in 2020 this became a more common work model for so many businesses due to mandatory locked downs.
This brought so many questions to employers on how to be in compliance with all the tax obligations within the states. Thankfully, some states announced relief from certain tax obligations ordinarily imposed on a business whose employees work in those states.
The question now is, how long these reliefs are going to last and what you have to do to be prepared.
Some states assert that having employees working from home give the employer “Nexus” with the state for tax purposes, meaning, the employer/business may be obligated to pay state franchise, income, or other business tax, to collect and remit sales or use tax on taxable sales that the business makes into the state, to remit payroll taxes, and to comply with other tax payment or reporting requirements in the state.
Some states also have indicated that nexus for purposes of corporate income tax, and sales and use tax will not be established solely based on employees working remotely due to the pandemic.
If you are considering hiring someone living in a different state from the business location, it is highly recommended to look for the nexus guidance published by that specific state.
If still in doubt, you can always contact the Department of Labor of the State where your employee lives or consult with your accountant if necessary. It is always important to remain in compliance with the law to avoid future headaches.