For the patchwork of state income tax requirements to be resolved for traveling workers from other states, employers and payroll professionals should write their representatives in Congress, two proponents of a reintroduced bill to standardize thresholds for state tax liabilities said March 27.
The legislation (H.R. 1393, S. 540) reintroduced earlier this month has more co-sponsors in Congress than in previous sessions, so there is greater optimism for passage, said Elizabeth Malm, associate director of the Mobile Workforce Coalition, a group of organizations seeking more uniform tax requirements across states that have income tax laws.
Variations of the Mobile Workforce State Income Tax Simplification Act have been introduced in five other sessions of Congress without ever getting a full Senate review, although the proposal was approved twice in the House.
The latest version generally mirrors that of its predecessors: States would be prohibited from taxing most workers from other states for stays of up to 30 days a year, with exceptions. If a nonresident worker stays a 31st day, the work state would be able to retroactively apply taxes to those earnings, Malm said March 27 at the American Payroll Association’s 2017 Capital Summit in Washington.
The issue affects employers and employees the most, said Aziza Farooki, director of policy at the Council on State Taxation.
Nearly 500 million domestic business trips were taken in 2015, Farooki told summit participants as she referenced a study by the Global Business Travel Association and Ernst & Young.
A state looking for new or increased revenue streams views workers from other places as low-hanging fruit for collecting income taxes on earnings for work within the state. By increasing these collections, a state may avoid increasing some broad-based taxes on its own residents who have a say on such matters in the voting booth, Farooki said.
As Malm put it, “It’s easier to tax someone who doesn’t vote for me than those who do.”
Employers and employees are having to register and file in some nonresident states for little liability, Malm said, noting that those states need to process forms that often result in no tax liability because earnings thresholds were not met.
And states are getting better at identifying those traveling workers who fail to file and would be liable for taxation through technology-assisted audit techniques, Farooki said.
The legislation as proposed has been resisted by representatives from states that have high volumes of travelers, and thus more revenue to lose if a standardized solution is instituted. These include New York, Connecticut, California and Ohio, Farooki said.
This year already there are signs the resistance to such standardization is starting to break, based on the engagement by members of Congress, Malm said.
While other alternatives have been raised, without success, there needs to be a federal, national solution to this issue, Malm said as she promoted the Mobile Workforce Coalition’s website. There soon would be template letters and resources for lobbying Congress on the issue, she said.
Take a free trial of Bloomberg BNA’s Payroll Decision Support Network, your one-stop resource for reliable, up-to-date guidance and analysis in every area of payroll administration and compliance.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)