Is allowing my staff to work virtually creating new tax issues?
Mathew Shiebler, CPA
Since March of this year, many of us have transitioned our businesses to working remotely due to the impacts from Covid-19. This has resulted in some of our staff working from home or other remote locations, and while we all struggled to get our companies set up to deal with this issue, most of have now settled into our new work environments. Most all state governments recognize that this was necessary due to Covid-19, however my experience is that state governments are always looking to capture tax dollars when applicable. This leads us to the concept of nexus for tax purposes. Nexus is generally defined as having a physical or other legal connection to a state and requires a business owner to register for taxes there. Now for some of us that only have employees working remotely in our company's home state, this isn't an issue. But for others, we may have our business located in a state that closely borders other states. Prior to the Covid-19 pandemic, those employees commuted to your business location but are now working remotely in another state. An example would be an employee that lives in CT and worked in NY prior to the pandemic, but is now working from home in CT. Having an employee working remotely on a permanent basis in another state other than one you are registered to do business in will create nexus with that state.
Now while we all hope that the Covid-19 situation goes away soon, some of us may have re-thought our business model and wish to keep workers remote and reduce our office space or not have one at all. If this is your case and you have permanent employees working in a state that your business is not registered to do business in, please give us a call so we can provide you with a case by case verdict on whether you need to register for business in that state.
As a company that employs staff that work remotely, this topic is near and dear to my heart and one that I have a lot of experience with. So please if you have any questions, don't hesitate to reach out.