Key SALT Considerations for Remote Employees

Andria Siciliano:
Hey, Tim. How are you?

TS:
I'm great, I'm great. I'm glad you're here with us today. Andria, what does an employer need to consider when hiring remote workers or allowing employees to move to states that the company does not have a physical footprint in?

AS:
Well, there are several areas a company needs to consider when hiring remote workers. But in a nutshell, remote work is well established generally, but the implications of work locations crossing state lines is not well understood, and if not properly managed, may create significant administrative burdens and other problems for employers.

TS:
What nexus issues does this cause?

AS:
Well, nexus is created by remote working employees and can create significant tax liabilities in new jurisdiction, especially for income tax purposes, where the company has significant receipt from the state and the state importuned using a single factor sales formula. A remote employee can create nexus for various taxes, including income taxes, grocery receipts taxes, sales taxes, and local business taxes. In many cases, the employee's presence may amount to a nuisance tax, but compliance is still key to avoiding unwanted penalties and interest for failure to abide by a jurisdiction tax rule.

TS:
Well, I know we've been on the receiving end of that, Andria, with our clients about noncompliance and abatements and trying to get out of certain things by that. You always want to make sure that you as a business owner are really going through this process to make sure that you are being compliant from a state's perspective. But what are actually these compliance requirements that could potentially fall on the company?

AS:
Well, with a remote employee, there are several potential compliance requirements, and the easiest and most obvious requirement would be the payroll tax obligations for withholding taxes and unemployment, but also the health and welfare benefits that go along with hiring an employee need to be considered. With payroll taxes, there's usually a Secretary of State filing requirement, which includes providing a registered agent. After this, we have sales tax filing obligations and state and local business taxes. For example, occupational taxes and business license, and not leave out the potential company's income tax filing obligation.

TS:
Wow. That's actually a very substantial list there that I think business owners may not be considering when hiring remote workers. There's things that we always want to talk to our clients about, and I know that this is a hot topic area for really many folks, and I know we're talking to our clients about this. Any parting words that you want to share with our listeners today for this purpose? You're an expert in the area. What would you say?

AS:
Well, I think the key takeaways here are remote working is here to stay, and that there are a ton of potential pitfalls a business can encounter. Another key takeaway is to consult your state and local tax advisors, as being proactive can reduce the burdens and potential liabilities imposed by state. By nature and experience, we're already very adapt at addressing the complexity that comes with juggling multiple jurisdictions and tax type, and also compliance within these jurisdictions, the constant changes and developments, and the uncertainty that comes from the lack of understanding authoritative guidance.

TS:
Andria, honestly, we can't thank you enough for being with us here today and sharing this valuable information. Thank you for listening to The Bottom Line as part of the EisnerAmper podcast series. If you have any questions or there's a topic you'd like us to cover, email us at contact@eisneramper.com. Visit eisneramper.com for more information on this and a host of other topics. Join us for our next EisnerAmper podcast when we get down to business.

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