Weekly Round-Up: The Perils of Allowing Employees to Telecommute

Telecommuting is increasingly becoming a common employment arrangement. Yet, despite the numerous advantages of telecommuting to both companies and employees, employers are hesitating to offer the alternative work arrangement as an option to out-of-state employees because of the likelihood that states will subject the employer to a variety of state and local taxes, Bloomberg BNA State Tax Law Editor Nadine Gjurich explains in this week’s issue of the Weekly State Tax Report.

The recent decision in Telebright Corporation Inc. v. Director, New Jersey Division of Taxation, 25 N.J. Tax 222 (2010), aff'd, 424 N.J. Super. 384 (2012), may have established the precedent states will follow when deciding whether to assess tax liability on an out-of-state employer that has only one employee telecommuting from the state on a full-time basis.

A majority of states share New Jersey's conclusion that employing one person in the state is not de minimis, but rather, could create substantial nexus with the state.

According to the Bloomberg BNA 2012 Survey of State Tax Departments, 35 states reported that nexus would result for an out-of-state employer that permits an employee to telecommute from a home within their borders and who performs non-solicitation activities. Several states indicated that their answer would remain the same even if the corporation made no sales in the state or the employee telecommuted for only part of his or her total work time.

According to the survey, only six states said telecommuting would not trigger nexus for an out-of-state employer. Those states are Indiana, Kentucky, Maryland, Mississippi, Oklahoma, and Virginia.

Gjurich’s complete analysis of how employers and states can respond to the Telebright decision can be read in its entirety here .

In other developments…

Some upcoming sales and use tax rule changes from the Texas Comptroller's office , by the Texas State and Local Tax Law Blog.

Monday Map: State tax incentives for business , by  Nick Kasprak of the Tax Foundation.

N.J. increases tax on P.L. 86-272-protected companies , according to a new alert by Reed Smith LLP.

As prices soar to buy a luxury address, the tax bills don’t , according to the New York Times.

Employers have until November 2 to file protective claims for the New York Metropolitan Payroll Tax refunds , PwC reports.

PA Supreme Court affirms that shipping pallets are not taxable, creating refund opportunity for purchasers , according to a new alert by Reed Smith LLP.

Compiled by Priya D. Nair
Follow us on Twitter at:
Join BNA's State Tax Group on LinkedIn