Chances are, you or someone you know was forced to move quickly to a remote working environment when shelter-in-place mandates were issued. One day, an individual may have worked in an office in New York; the next, that same individual was working from their home in Connecticut, Rhode Island, or another neighboring state. Whether or not this employee works there temporarily, or this remote working arrangement becomes permanent, it may be creating new tax obligation for the New York company.
Businesses that previously had been employing a remote workforce should have an easier time adjusting to the tax realities of a remote workforce. Those businesses, however, that have relied on a physically present workforce in a single jurisdiction may have been caught off guard when their workforce moved outside the office walls and may end up making amends from a tax perspective for some time to come.
What constitutes nexus for this remote workforce?
Prior to the coronavirus outbreak, most jurisdictions considered a remote employee a nexus creating activity, thus subjecting the business to tax in that remote jurisdiction. Some states have deemed an employee spending as little as a single day physically present within that jurisdiction as a nexus-creating activity. One remote employee in a state for a day could create a duty to collect sales tax and file, and possibly have the obligation to file an income tax return.
Why should one remote employee constitute ‘doing business’ in the state?
Some states rethinking their policies on when remote employees trigger nexus in light of the COVID-19 pandemic. Several states are saying they will throw out the rule in favor of something more reasonable during while employees are working remotely due to the pandemic.
Is it time to rethink physical presence nexus due to remote employees altogether?
We’ll keep you posted as states answer this question and finalize rules in this area. Get in touch with a TaxOps Advisor and get answers to your tax questions or Contact Us at SALTovation.
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Judy Vorndran can be reached at jvorndran@taxops.com or 720.227.0093.
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