Employers should weigh the risks and administrative burdens
when deciding whether to implement a multistate jurisdictional taxation system,
a payroll executive said May 7 at the 2013 American Payroll Association
Congress in Grapevine, Texas.
Because employees can work in more than one location in a state
or states, there may be obligations for tax payments, said Cheryl Seifritz, payroll
director for Ohio State University.Publish
A decision to implement a multistate tax-payment program
should include discussions with the human resources and employee relations
departments, and top management, Seifritz said, citing experiences in 2011 with
the regional financial institution KeyBank, which is owned by the holding
company KeyCorp. Multistate jurisdictional taxation issues can arise from:
- an
increase in remotely located workers
- technological advancements, and
- new capabilities to administer multistate taxation.
With 18,000 employees in 39 states, a systematic solution
was needed by KeyBank officials to ensure compliance, Seifritz said.
To create such a process, employers should at state
regulations for jurisdictions in which they have a presence, especially in
cases when employees travel to those locations, said Kadiesha Jarrell-Hill,
payroll production manager for KeyBank. Some employer’s tax the first day an
employee works in a state, while others allow a 14-day de minimus period, she
said.
For employers, the
key issues are nexus, or a business presence; employee residences; and state
reciprocity rules. “There is no standard guideline for when to tax employees
when they travel because each state can be different,” Jarrell-Hill said.
Employer also needs to determine how compliant they want to
be with state laws and how much extra effort would be required of the payroll
department, Seifritz said. Employers also must determine how employee pay would
be affected, she said.
Additionally, taxation policies and compliance requirements
should be included in an organization’s code of ethics, Jarrell-Hill said.
For employees in multiple jurisdictions, the payroll
department should be aware of the local tax code and how it might be affected
by the first instance of service by an employee, Seifritz said. For interstate work, the 14th occurrence would
be key, Seifritz said.
In all cases, managers should approve the work
situations, but mobile workers also should be periodically, Jarrell-Hill said.
“It’s easier for them to find who’s traveling, who isn’t,
and what the period of time is,” Seifritz said, referring to the use of
technology to document and track worker locations.
Systems can be customized, Jarell-Hill said. Training can be
administered online, through reference tools, or by way of call center
classroom training, she said.
“There was nothing keeping us from doing it technology-wise,
other than the cost,” Seifritz added.
By Kristin N. Washington