Nexus employment registration#

Nexus employment registration#

An employee working remotely from their residence may cause that protection to be lost.įinally, establishing new nexus for any state tax due to a remote workforce could create and complicate registration and compliance obligations. Importantly, a business can establish nexus through many other mechanisms beyond the presence of employees, including through property in the state or based on sales into a state.Īdditionally, some businesses may have had nexus in a state, but were otherwise not subject to an income tax liability because of Public Law 86-272, the federal safe harbor prohibiting a state from imposing a net income tax on a seller's business activity if it is limited to the solicitation of orders for sales of tangible personal property. An employee living in a different state would normally not create nexus for the employer, but as a remote worker, that employee attributes presence to the employer through their performance of their employment duties at home. Businesses with employees working remotely, as they would have in an office location, could find they are subject to a state’s tax laws based merely on the presence of the employee.Įstablishing nexus through remote workforce could cause new income and franchise tax and sales and use tax obligations if nexus was not previously established in the employee’s resident state. A company is generally considered to be doing business and subject to a state’s tax laws if the company has employees working in the state. Nexus footprint and Public Law 86-272 considerationsĪ remote workforce can dramatically affect a company’s state tax nexus footprint.

With all of those workforce dynamics in mind, there are a number of state and local tax considerations for remote workforces. Employers near state lines may find moving operations to neighboring jurisdictions could decrease state and local tax expenses without sacrificing the quality of the product or service offered.

Employers may find expensive downtown office spaces are no longer needed, or find more value in a smaller real estate footprint. However, the nature of a remote workforce may not just benefit employers struggling to respond safely and appropriately to COVID-19. Fringe benefits such as daycare, transportation, and parking paid by employers are reduced, and costs to employees to commute are all but eliminated. Offices can avoid restocking costs or closing down kitchens and coffee machines. Cubicles no longer need higher walls or even ceilings. From a public health perspective, offices do not have to reengineer work spaces to accommodate social distancing. The benefits of a remote workforce are clear. As uncertainty about the COVID-19 recovery and the distressed economy continues, many employers and employees may choose to maintain remote workforce arrangements. Civil unrest has prevented some businesses in city-centers from reopening as pandemic stay-at-home orders are relaxed and states move into new phases of reopening. The spring shutdown of the economy led to massive lay-offs and furloughs. Millions of employees worked remotely during the pandemic. The COVID-19 pandemic is rapidly changing how businesses are managing their workforces.