Navigating the Challenges of Remote Employees with Olga Goldberg
Hosts & Guests
Olga Goldberg, SALT Partner at Pierce Atwood LLP
Meredith Smith, State and Local Tax Senior Manager
Alex Korzhen, Leader, Senior Manager, J.D.
What You Will Discover:
In this episode of SALTovation, Meredith Smith and Alexander Korzhen speak with Olga Goldberg, SALT Partner at Pierce Atwood LLP. Olga shares her journey into the field of law and specialization in state and local tax. Olga delves into the challenges and concerns surrounding remote employees, particularly concerning nexus and withholding. She discusses the current legal issues she consistently argues in state and local tax and the challenges and concerns associated with remote employees, particularly regarding nexus and withholding. Tune in to hear more about Olga’s unique journey and insights into state tax.
Topics Discussed in this Episode:
- Law is problem-solving in the real world
- Navigating remote employee tax issues
- Compliance with remote work taxes
- Residency audit complexities
- Maine Safe Harbor
- New Hampshire residency requirements explained
- “One of the reasons I like to work with our employment lawyers is because we talk a lot about, how we are going to document this information, and what kind of policies the company should have in place.” -Olga Goldberg [16:13]
- “There are two paths to being treated as a resident. One is common law domicile and two is statutory residency. So New Hampshire does not have a statutory residency. It’s common law principles and they have a statute that defines what a residence is.” -Olga Goldberg [25:25]
- “If you’re in a situation where you have this super low bar to clear to be treated as a New Hampshire resident under this department position, and you don’t have a resident tax credit, which, to me, does not seem entirely constitutional, it’s going to result in a lot of double taxation.” -Olga Goldberg [29:33]
- “The pandemic opened the playing field, but then you have these established larger employers who maybe they did and maybe they didn’t shift their policies during the pandemic, but then they contracted again. So they’re kind of shifting back because of these tax policies, tax rules, and the difficulty of compliance.” -Olga Goldberg [18:01]
Meredith Smith: [00:00:00] Welcome to SALTovation. The SALTovation Show is a podcast series featuring the leading voices in salt, where we talk about the issues and strategies to help you make sense of state and local tax. Well, thank you so much for being here. It's great to have you and talk to you about, you know, state tax.
Olga Goldberg: Thank you for having me. I'm delighted to do it.
Meredith Smith: So what initially attracted you to the field of law and then what kind of. took you into kind of the state and local tax base within
Olga Goldberg: that. So, so I thought about this question and I thought I would sort of tell a story if you will indulge me. Um, always great.
So I started thinking about the, the field of law part and I think that there are a lot of people who become lawyers who. grow up, they know they want to be a lawyer. Like maybe they have [00:01:00] lawyers in their family or in, you know, they grow up around lawyers, but that, that was not me. Um, I did not know a single lawyer.
And like Alex, my family immigrated from the former Soviet Union to the United States. And my parents were engineers and they worked as computer programmers. They, you know, very, very science oriented. So their friends were also IT. Their friends were also science y people. So they didn't really quite know what to do with a kid who was not good at science and was really good at like writing and English and like interested in social science and all of that stuff.
They couldn't really recommend a path for me. And so I kind of started and tried a bunch of different things before I landed in law. So I went to college and [00:02:00] I majored in psychology because I was I was super interested in all of these fascinating social societal problems and, you know, in psychology you think of all of these fun questions and you hypothesize about their answers and you can, you know, dive into these experiments and, and try to figure out what, what the actual answers to the questions are.
But ultimately, um, didn't like psychology, felt unsatisfying because it didn't feel like real world. problems. You know, I, I did, I did a project my senior year where I tried to figure out whether, um, I went to Washington University and I did a project my senior year where I tried to figure out whether, like, the mere exposure effect would mean that by going to school with all these people for the last four years, we would like all start finding each other more attractive.
Then then they actually are. Um, so that's nothing that's not that's not a real problem.
Alexander Korzhen: Well, well, how big [00:03:00] is washington university?
Olga Goldberg: I think it's about two to three thousand all together
Alexander Korzhen: so So what was the conclusion to your hypothesis because I went to a really small school, too Uh in lancaster pennsylvania, I think we had about three thousand undergraduate on campus And and I thought about the same thing at that time And by the time that we were graduating Uh, senior year.
Um, I felt fairly confident that that was true.
Olga Goldberg: Yeah. So, so here's what the science says is there was no significant statistically significant result, but there was an interesting change in that the women actually lowered their standards over the course of time, whereas the men remained exactly the same.
So. So that was my societal finding that
Alexander Korzhen: my non scientific findings were that there was [00:04:00] definitely, um,
Olga Goldberg: Okay, so then, so then I thought So, uh, psychology is not for me. And after college, I, I was like, okay, I did all this stuff that didn't involve any real world problem solving. Like I really want to do problem solving in the real world. So I went kind of all in on that. And I moved to the woods in New Hampshire and did a year long conservation core program through AmeriCorps.
Um, so basically that year I was living in CCC camps. and in like a tent outside and I was building trails and I was building yurts and I was using chainsaws and state parks and so that was like the real problem solving thing that I wanted to experience. Um, but, um, I can tell you that, that hauling hand tools a mile [00:05:00] uphill into the woods.
Um, that gets a little bit exhausting. So I thought, all right, that, that probably isn't for me. And during that time, a friend who was in the program with me, he was planning to go to law school and he just left some of his LSAT prep books unattended. And I got so bored that I started flipping through them and I got really sucked into doing the logic puzzles.
So I kind of figured, all right, if I was like inexplicably having fun studying for law school, I should probably look into the laws as an option for my career. And that's sort of when I realized that, hey, that's That's exactly what law is. You're solving problems. It's in the real world. It's for real clients.
And, you know, the bonus is that you don't have to lift rocks or, or dig trails. And, you know, I can kind of do that as a hobby on the weekend if I want to. You're like the
Meredith Smith: granola version of Elle Woods, [00:06:00] just like one day I'll decide to go to law school.
Olga Goldberg: Yeah. Yeah. Um, I, you know, like I made the video of myself, um, wearing a lot of flannel.
Meredith Smith: Hopping out of a tree and not a hot tub.
Olga Goldberg: That's exactly right. Yeah. Yeah. I have like a chainsaw. So.
Alexander Korzhen: These are more, uh, legally blonde references to all our listeners who are not, um, not up on their 90s, 90s, 2000s pop culture. I
Meredith Smith: think that's odd. I don't know, but they
Olga Goldberg: should be. Whatever. Yeah, that's a great question.
I'm not sure. Mandatory viewing for all lawyers, I think. So that's a really long answer to your question of how, how did I find the law. Um. you know, I, I want, I liked problem solving a lot. I, I wanted to be out in the world doing that. And, and so I, so I went to law school and I didn't really know what I wanted to do.
I kind of thought I was going to do environmental law because I came from the woods and I, I started kind [00:07:00] of like taking this track towards tax as sort of like a backup. And I found out that I'm, you know, for whatever reason, I'm the weirdo whose brain is wired to really, really enjoy tax. Um, and, and so I, I took a bunch of tax classes, uh, in law school and then I went to NYU and got my LLM.
Um, and so while I was up in New York, I, you know, was looking for a job and I had gone to law school. school in Austin, Texas, and my, my boyfriend, who's now my husband, he was living down in Texas. And so I knew I wanted to go down there for at least a few years to, to start practicing. And I saw this job posting for a.
assault litigation boutique, um, in Austin. And that just seemed like a really good fit because I really wanted to do a lot of research and writing and, and, and just like hone those skills. [00:08:00] And I wanted kind of an individualized small firm setting where I knew I was going to get like the training and attention, um, to become a better lawyer.
So, so what I did at that point is I applied for this job and then I signed up for Professor Pomp. state and local tax class. And then I, and then like months later, I got the job. So luckily it, it all worked out. Um, so I, so that's kind of how I landed in salt. And so I, I worked with, um, with Doug Siegel, who I think is one of the best.
litigators there is in in our field. And, um, and it was great. Like, I got thrown into the deep end. My very first assignment, I had to write the response to the Texas Controllers motion for summary judgment in the AMC franchise tax case in Texas. where AMC was basically taking the position that it should get [00:09:00] to subtract as cost of goods sold because it sold a product that was perceptible to the census.
So a really, I think an interesting argument, you get thrown into the deep end of like interpreting statutory language, making plain language arguments to the court. Um, at that point, Texas courts were going all in on just, you know, read the text. and apply the text. And, and that was really great. And, you know, I think it also helped that we won a bunch of cases in my first couple years of practice.
So there's a lot of positive reinforcement.
Meredith Smith: Yeah. Yeah. No kidding. So then what, what sort of legal issues are you working through kind of right now? What are you seeing show up if there's any repeat offenders, um, either on the state side or, you know, kind of the, are you things that you're arguing?
Olga Goldberg: Yeah, and so I think we're going to talk about remote [00:10:00] employees and Wayfair maybe later on.
So, I won't talk about those now, but I do see. No, you can talk about them now. Sure. Um. Whatever
Meredith Smith: you want. The world is your oyster. This podcast is your
Olga Goldberg: Awesome. Thank you so much. So, so I think like a lot of practitioners, I, I've been seeing a lot of issues around, um, remote employees. Um, and a lot of employers coming to us with those issues, I've actually been really lucky and I've, I have a really good relationship with our employment group because these questions go hand in hand with questions that they're answering about, okay, like what kind of policies are employers putting in place and, and workers comp and unemployment insurance, like all of those employment issues that I don't deal with as much.
So we've been tag teaming. remote worker issues. And I think the concerns that we're seeing are, are kind of twofold. Um, [00:11:00] one, you know, unsurprisingly, one is nexus and the other is withholding. And so, so on the withholding side, I get a lot of questions along the lines of, you know, how long does an employee have to be working from a state for me to have to start withholding.
And in Maine, we actually have a pretty sensible, um, safe harbor where it's 12 days and 5, 000 in wages. So if you have kind of like a more low level employee who's just wandering into this. state, you're not going to have a withholding requirement. Um, but you know, in a bunch of states, as we know, it's kind of the wild west out there and states are all over the place and you know, a bunch of states say it's day one, you have to withhold.
So I have a lot of income earned
Meredith Smith: or what does that even mean? If I'm my earning income, if I jump on a phone call from my parents pool,
Olga Goldberg: right, right, right. Yeah. Um, I think some [00:12:00] states would say, yeah, right. Um, yeah. So you have these conversations where you're running up against like what is what the law seems to require versus what is practical for, for the employer.
And, you know, I think in a lot of cases I, I tell them, you know, I think I can advise you on what the law requires and you can do what's right for your business. And, and, you know, we all do our best. It's
Alexander Korzhen: interesting. I think we see that a lot in state taxation, but specifically or commonly in this area, right?
Where, where it's, um, you can try, uh, as best as you can, but a hundred percent compliance is. Almost impossible, especially if you have a large, uh, spread out workforce. It's incredibly, incredibly challenging to stay compliant. So it's kind of like do the best
Olga Goldberg: you can. Right. And I think it, you know, on the business side and It, it comes down to just, [00:13:00] you know, what is the risk analysis, you know, what is the likelihood that a state is going to come after you for somebody answering a phone call from their parents pool?
Alexander Korzhen: you, have you seen any enforcement, uh, that you can talk about on this point? Because I, I, you know, I, I think this is, this is a very hot topic and then legal issues are real. I, I, I'm not. Sure, I've seen a lot of high profile enforcement on it, though, from a withholding perspective against the employer, right?
Because at the end of the day, the employer has that responsibility. Yeah. Uh, to, uh, uh, to withhold, but the tax is the employees, right? Um, and theoretically, you know, kind of painting in broad strokes here, at the end of the day, it should kind of equalize on the taxes, on the personal income tax side, right?
If everything is done properly on that side, eventually.
Olga Goldberg: Yeah, I agree with you. And, um, I haven't seen [00:14:00] enforcement and it might just be that, that there is enforcement, but, but we don't see it because we generally don't see like the audit piece of, of things we see it when employer or company is. Is ready to appeal.
So I'm not, I'm not sure, but, you know, I think a flip side of an employer trying to be as compliant as they can be is that you can end up with, you know, multiple withholding on the same income for employees. So like, just, you know, a very simple example that came up the other day is, You know, a client hired an employee in California, you know, he's a California resident, he's going to be working from California and, but he's going to be spending half of his time working from Massachusetts.
So They're like, wait, what are we supposed to do? Are [00:15:00] we supposed to withhold also in Massachusetts? And you know, I think the answer is yeah, you have to withhold on a hundred percent in California and then you can withhold on 50% in Massachusetts and then you know, and then their concern was also like, okay, so his contract says He's working halftime from Massachusetts, but what if things change, you know, and what do we do, you know, how do we keep track of where this, this one person is, and this is, you know, very small scale because like you were saying, Alex.
A lot bigger companies have to keep track of a whole lot more than the one employee.
Alexander Korzhen: Well, but to your point, I think it can, it can, it can bloom very easily with a larger workforce, right? I think taking, taking your example kind of to the next level, in your example, the employer was aware, right? What if they're not?
Right. What if this is, you know, uh, I don't know, I'm in Minnesota, so let's just use Minnesota. What if this is a Minnesota employee who [00:16:00] goes, you know, who has a, a sick parent that they need to go care for in a different state and they can perform their duties remotely and they don't tell their employer that they're not in Minnesota anymore.
Right. So what's the burden on the employer to investigate? Right. Like how, how, how much do they have to, how hard do they have to work to discover that information from, you know, from the perspective of the, I have no idea what the answer is. I think that's, that's, I'm not
Olga Goldberg: even sure there is an answer.
Yeah. And that's one of the, um, one of the reasons I like to work with our employment lawyers because we talk a lot about, okay, how are we going to like document this information and what kind of policies should the company have in place? So like with the California employee, we put a memo in, in his.
Personnel file that we had him sign that says, okay, this is how we're doing withholding for you. Like you are aware you talk to your tax [00:17:00] advisor. Um, we are asking you to let us know if something changes. You know, another thing I've talked to companies about is have a list of like approved states, you know?
And so if, if you are going to have people wandering, okay, you can wander to like XYZ state, but not New York, for example. Um, so I think it's like having policies in place and having people. Um, aware that those policies exist.
Alexander Korzhen: It's a really interesting dichotomy, actually, that's happening right now that I think you're kind of alluding to.
You know, with, with, uh, with the pandemic, we saw a pretty, uh, palpable shift to remote work, right? And, and, uh, uh, hiring, um, what's the word? Um, when you, when you don't care where you're hiring. Agnostic. Thank you. Yes, higher being agnostic about [00:18:00] your hiring, right? So so the pandemic seem to have kind of opened the playing field, but then you have these these established larger employers who Maybe they did and maybe they didn't Shift their policies during the pandemic, but then they contracted again, right?
And they're and now they're back to Do where you know, we have we have a list of states In in in a file in our desk drawer that says, you know, these are our green states These are yellow states and these are red states and you know, and we absolutely will not hire anybody in those red states so they're kind of Kind of shifting back.
Um, because of these these these tax policies these tax rules and the difficulty of compliance Yeah, are you seeing that
Olga Goldberg: as well? um That's a good question I I don't know. I I haven't seen it. I haven't seen it personally It sounds like I should check in with some of our employment folks and see if they've seen it [00:19:00] Because you know, obviously companies have concerns other than just tax issues Um Yeah.
Alexander Korzhen: It'd be nice
Olga Goldberg: if they thought they think of us last. One.
Meredith Smith: Or slowly think things. One, what we run into as well is, well, if, you know, someone's going to go temporarily hang out in Alabama, so we're going to do our withholding correctly. We're going to get a license, do all that nonsense. It's like, well, do we really need to?
To collect on and like unemployment like this person is never going to claim or file for unemployment in Alabama. They're a Minnesota resident and they're just going to help out with their, you know, with their grand, you know, their parents, whatever for a couple months. But yeah, they're going to go back to Minnesota at the end of the day.
So do you have to have an unemployment license? Because once you get these things, they're kind of a pain in the ass to unget them. Right. Because then you've got, you know, income tax issues. You've [00:20:00] got, you know, the ongoing compliance. You've got third party kind of payroll providers that won't close licenses and they won't always file those zero returns when there's nothing happening.
And so then you have this. Slew of kind of trailing compliance that is it easier to just be non-compliant in the first place and take your chances? I don't know. It's just one of those, those difficulties when it comes to, yeah, that, you know, ability to get on an airplane and go wherever you want. 'cause no one's showing up anywhere.
Olga Goldberg: Right. And I don't know how, um, the unemployment tax side of things works. Um, is that also, is that similar to withholding where you have to do it in every state or is that, um, you kind of pick a state and do it there?
Alexander Korzhen: The rules I think are kind of, you know, like with anything else in state, um, it's, it's all over the place, but, uh, I don't think it [00:21:00] tracks.
As neatly as you would like it to. I think in, in certain cases, it kind of defaults to the domicile. So, uh, it's, it's a little more difficult to, to figure that out, uh, practically speaking. There's a decoupling that we tend to see, um, with UI and, and with Holden. Speaking
Olga Goldberg: of domicile, can we talk about domicile?
Sure. Yeah. I saw the opening and I went for it. Let's do it. Transition. Um, so just, you know, to, to kind of get another topic in there in terms of, you know, other things that, I have been seeing a lot and I think, again, a lot of people deal with this is, is residency audits and residency issues. Um, and I wanted to particularly like talk about a particular case that we have right now because I think that a lot of [00:22:00] practitioners when they Are dealing with residency audit.
It's almost always in the circumstance where an individual is trying to relocate from from a high tax state to a lower tax state. And the high tax state doesn't want to let go. And so, so I have the opposite case, which I think you almost never ever see where, um, it is a, uh, New Hampshire residency audit Of a Connecticut domiciliary, which is weird, right?
Because New Hampshire doesn't have an individual income tax, but they do at least until 2024. They have an interest in dividends tax. I'm on New Hampshire residents only so no broad based individual income tax, but there is an interest in dividends tax
Alexander Korzhen: So one repeat the facts again that New Hampshire is the the non resident state
Olga Goldberg: Asserted that these two taxpayers [00:23:00] have established New Hampshire residency for purposes of interest and dividends tax and so So, okay, so this it's like it's a really really wild case Because, so it's, it's two individuals, they live in Connecticut, they have a vacation house in New Hampshire, very, very common fact pattern, um, and they, this one year, this involves one year, they spent less than 80 days at their New Hampshire summer house.
So less than 80 days is about the duration of a New Hampshire summer, um, and, and based on that, New Hampshire has asserted that they were New Hampshire residents. So in this audit, the state has taken the position that for the first half of the year, the, these folks were Connecticut residents, not residents [00:24:00] of New Hampshire, then for the next like six or so months.
They were New Hampshire residents, and then in the immediately following year, they were Connecticut residents again. And so, yeah, I think, I think, like, everyone's kind of making a face because, you know, if you know anything about, like, just the basic common law domicile principles is that you have to have some intent to abandon your previous domicile to establish a new domicile.
So I think it's really hard to take the position that, okay, you're, you're Connecticut before and after, and then New Hampshire in the middle, and, but you intended to abandon your domicile for just those six months. Wow.
Alexander Korzhen: What's interesting, and I'm not an expert in this, but I don't, I don't do personal residence or anything like that, but, but, you know, but I've stayed on a holiday in express bus.
So, um, so, uh, you can have, uh, dual, [00:25:00] domicile in quotes via the statutory residency rules, right? So you can become a statutory resident of a different state, but, uh, the states that I've heard about, New York is the one that comes off the top of my head. I think Minnesota has a similar rule as well. Um, it's usually like 183 day test with some other requirement, like a permanent place of abode and something along those lines.
So does New Hampshire even
Olga Goldberg: have that? It doesn't so there's no so yeah What you're talking about is like there's two paths to being treated as a resident one is Common law domicile and to a statutory residency. So New Hampshire does not have a statutory residency It's really like common law domicile principles and they have a statute actually that defines what a residence is And it goes something along the lines of it's your primary place of physical presence to the exclusion of all [00:26:00] others.
And you have to show like there has to be a to the exclusion of all other places in order to establish a residency. So, so in this case, um, I think the, the thing that kind of blows my mind is, you know, okay, so why, why did New Hampshire take this position?
Alexander Korzhen: Yeah, it seems kind of like a loser based on
Olga Goldberg: what we're hearing.
Yeah, I mean, we do think it's a loser, but, um, for, we are in litigation, but the taxpayers, like, this is something that comes up with, like, anyone who advises, I think, on residency, the taxpayers are. thinking about, okay, maybe we will retire in New Hampshire. And their tax advisors said, all right, here, here are the first things you do to establish domicile in a place.
You do these ministerial steps. So they registered to vote. They got driver's licenses. They Paid estimated interest and dividend taxes. They registered, um, the [00:27:00] husband's business to do business in New Hampshire. So they, they, that's it. That's all they did. And then, you know, come fall, they realized, Hey, this isn't going to work.
And then they undid all of those stuff. Except for they,
Alexander Korzhen: so there were, there were some steps taken kind
Olga Goldberg: of in that direction. Yeah. So they, so they took those steps. But I think like whenever you advise somebody on changing their domicile, you say, these are the first steps, but those aren't gonna get you there.
They're not gonna get, they're never gonna get you out of a. state. You know, you have to do more. You have to like move your doctors. You have to move your church. You have to move your community activities. You should like serve on board. You should make some friends. You know, you should point to all these things that show community ties in the new place.
And they just had none of that. They, they really did nothing at all to change their relationship in Connecticut. Like they're paying Connecticut resident tax returns. Um, they're like working full time from Connecticut. So so there's really no steps [00:28:00] taken on the Connecticut side to to sever that tie. And I don't really think it's like going out on a limb to say that Connecticut would agree that like for the six month period that you guys were no longer Connecticut domiciliaries.
That's a very interesting case. It is. And if there's one more twist, if you will indulge me, um, you know, Alex, you were kind of surprised that, um, New Hampshire has a tax, uh, an income tax on individuals. And so, so this interest in dividends tax, it's really the only individual income tax in the country that doesn't allow for a credit to residents for taxes paid to other states.
And I, I would assume the reason being that it's only a tax on interest in dividend income and the state of residence gets to tax income from intangibles, that whole Mobilia doctrine. So here we have like [00:29:00] the income at issues. primarily dividends, but it's it's related to the taxpayers business that is conducted in in Connecticut.
And so, so that's one fact. And then the other fact is that in the administrative hearing, the department had taken this position that the New Hampshire residency regulation Is Um, has, has this list of things that you can do to show that you're a New Hampshire resident, and the department took the position that that list is disjunctive, meaning that you can be treated as a New Hampshire resident.
If you have a house in New Hampshire, you can be treated as a New Hampshire resident. If you work in New Hampshire, you can be treated as a New Hampshire resident. If you have family living with you in New Hampshire, like any one of those is enough. So if you, you're in a situation where you have this.
Super low bar to clear to be treated a New Hampshire resident under this department position, and you don't have a resident tax [00:30:00] credit, which you know, to me, it does not seem entirely constitutional. It's like, obviously going to result in a lot of double taxation. And so, so we have, we actually filed a motion for summary judgment on that basis, asserting that the position violated the adjournment commerce clause and the internal consistency test under when, which seems like very obvious, you know, if you are, you know, commuting from Massachusetts.
to New Hampshire and suddenly you're treated as a New Hampshire resident because you're working there and subject to interest and dividends tax, like you're going to have double taxation all over the place.
Alexander Korzhen: You don't, you don't hear about New Hampshire showing teeth too often, so I'm kind of getting excited about this.
Meredith Smith: This podcast is for educational purposes only and is not intended nor should it be relied upon as legal tax accounting or investment advice to consult with a competent professional to discuss the fix of your. situation and the applicability of the [00:31:00] information presented.
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