With many employees forced to work from home due to business and office closures, among myriad other concerns, employers may be forced to confront state tax issues, particularly when employees work in states or local jurisdictions other than where the employer has a presence.
In the world of stay-at-home orders and forced business closures, many businesses have been put in this situation without any opportunity to pre-plan or evaluate various state laws. In the absence of guidance from states, tax departments will need to evaluate whether and how they are required to file returns in several state and local jurisdictions in which they have not previously filed.
A few states and localities have issued guidance indicating that, in the context of the current crisis, ordinary nexus rules will not be strictly enforced. Other taxing authorities likely will announce nexus-related policies in the upcoming days and weeks.
While states thus far seem to have taken a sympathetic approach in light of COVID-19, the crisis called attention to an issue that existed before the crisis and that will continue to exist. In ordinary times, businesses should be careful when allowing employees to work remotely in other taxing jurisdictions and should pay attention, not just to employment-related concerns, but also to potentially unexpected tax consequences.
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By: Christopher JOnes & Wendi Kotzen
April 17, 2020