In a past blog, we talked about payroll tax implications of remotely working employees causing companies to have sufficient presence in a state to allow for the taxation of any its activities in that state. In the past, generally speaking, if an employee’s work location is temporary, income tax and nexus may not be created. However, the longer the pandemic continues and people are required to work from home, the more questions will be raised as to how much, if any, taxes are owed to states where remote employees are working.

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Some states have implemented special COVID-19 relief pertaining to nexus and income taxes, but the period of relief has expired or is about to expire while many companies are still accommodating work from home employees as there is still much uncertainty regarding the virus. Only a few states have said that they will waive sales tax nexus if it is a direct result of the pandemic. As we are all still navigating unchartered territory, we look to the federal and/or state governments for guidance and/or a relief plan to clarify or forgive payroll withholding liabilities and sales and use nexus. At this point, it is up to each jurisdiction to provide relief to businesses that have been directly affected by the crisis and remotely working employees. Until that guidance or tax relief is given, we recommend that employers keep the following information:

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  • Keep current records of where your employees are working.
  • Monitor the time they spend working in that location.
  • Stay up-to-date on guidance issued regarding this matter.

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Many companies have found it beneficial to form a COVID task force to keep this information and any other pertinent documents that may be needed regarding tax implications.

All of this is very confusing and added work for you as an employer, but it is necessary to avoid unnecessary taxes. If you have questions regarding your business’s tax implications of remotely working employees, contact Potts and Company today.