Multi-State – Temporary Telework Arrangements Could Become Permanent

Will some of the temporary tax policy changes states are making in response to the public health crisis become permanent? 

The question came up Tuesday in a teleconference meeting of the Strategic Planning Committee of the Multistate Tax Commission. Participants cited as a possible example the accommodations that several states have made for the employees working at home because of the virus. New Jersey, Mississippi, Pennsylvania, and Washington, D.C., to name a few, have said teleworkers won’t trigger corporate income tax liability for multistate companies. 

The issue is a thorny one, because employers normally are required to withhold tax for employees based on where they work, or possibly where they live. With many employees now off-base and teleworking from out-of-state locations, they could be triggering nexus—the conditions for taxabilty—in another state. That means states have to offer guidance. Last week, for example, Massachusetts said resident employees working in the state temporarily because of the crisis, and incurring a tax liability in another state from that state’s sourcing rules, were “eligible for a credit for taxes paid to that state.”

But for how long will those easier policies remain in place? 

“At some point states are going to need to sit down and give serious thought to that,” Greg Matson, MTC executive director, said Wednesday in a phone interview. “Maybe things stay, and maybe they don’t. It’ll be interesting to see.”

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Bloomberg tax
by paul stinson and tripp baltz
april 29, 2020