As we begin to see an end in sight for the pandemic in the United States, some states have started eliminating their temporary pandemic remote working tax relief programs related to employees working remotely. This could lead to your business being subject to additional state taxes, which may require you to file state tax returns for remote workers out of state. Some examples of relief provided by various states range from state tax nexus, employer payroll withholding responsibilities and payroll withholding obligations to out-of-state employers with remote employees in different states.
Businesses should begin reviewing how the temporary relief programs may have affected tax related to the location of employees. In addition, it is important to communicate with employees about their work arrangements and keep track of where all employees are located to ensure the company is up to date on any new tax implications. A key piece of this for the business will be evaluating their income tax, sales tax and payroll tax to ensure they comply with the state tax laws going forward.
The start of eliminating exemptions can be seen in Pennsylvania where on July 1st an out-of-state business that employs a state resident working from home will have sales and income tax nexus for 2021 and future years based on the activities of that employee. This means that if an out-of-state business did not have any remote workers before the pandemic, but now do, they may be subject to state taxes if their employee does not return to work at the local office.
As Pandemic remote working tax relief provisions begin to expire, businesses should prepare to navigate the changes and evaluate where additional tax implications may arise from employees working remotely in different states.
Meghan Metzger, MSA