Safe harbors are expiring across the nation. Employers should continue to monitor their remote-employee-related (and all other) nexus and understand their state tax duties that might arise as a result.
There’s a new trend afoot, with Minnesota Department of Revenue (DOR) one of the latest states to lift a pandemic safe harbor related to out-of-state employees telecommuting from Minnesota. More specifically, this guidance relates to employees telecommuting from Minnesota rather than from their regular out-of-state offices for corporate income and sales and use tax purposes.
The DOR explains that the nexus relief provided when offices nationwide closed during the pandemic will be lifted by June 30, 2022:
During the COVID-19 pandemic, some businesses had workers telecommuting from Minnesota rather than working in their regular offices outside of Minnesota. To help businesses and taxpayers impacted by the pandemic, the Minnesota Department of Revenue provided nexus relief from business income tax and sales and use tax specifically related to telecommuting due to the COVID-19 pandemic. From March 13, 2020, to June 30, 2022, Minnesota will not seek to establish nexus for business income tax or sales and use tax solely because an employee is temporarily telecommuting due to the COVID-19 pandemic. We are updating this guidance as businesses reopen their offices and workers return to their regular work locations.
The guidance gives business a short lead, through June 30, 2022, to decide whether to continue allowing employees to work remotely from Minnesota – thereby triggering potential income, sales and use, and other state and local tax requirements – or make other arrangements.
These safe harbors are expiring across the nation. Keep an eye out for changes state by state. Employers should continue to monitor their remote-employee-related (and all other) nexus and understand their state tax duties that might arise as a result.