With many employees no longer working at the business’s physical office locations, businesses need to evaluate their evolving footprint and the operational, legal, and tax implications a hybrid workplace presents.
Employees working across state lines can now expand a business’ pre-pandemic boundaries, for example. In these cases, businesses should consider whether the presence of employees trigger physical presence nexus in new jurisdictions, which can potentially create a host of costly new tax compliance obligations and liabilities.
Tax compliance considerations of a remote workforce for both the employer and the employee can include:
- Payroll taxes
- Corporate income taxes
- Personal income taxes
- Sales/Use taxes
- Excise taxes
- Miscellaneous taxes (i.e., local taxes)
Employee telework can also impact:
- Unemployment insurance
- Workers’ compensation coverage
- Secretary of State registrations and filings
- Personal domicile and residency presenting both risks and opportunities for individual taxpayers
- Nexus Studies
- “Convenience of the Employer” review
- Determination if employee presence in new states creates nexus for:
- Income tax purposes and/or
- Sales tax purposes
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Corey L. Rosenthal
JD, Principal, Practice Leader, State and Local Tax (SALT) Services
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