A NOT-SO-SIMPLE DECISION
By Scott Zielaskiewicz,
SALT consultant,
[email protected]
(Medina office)
tax implications for a mobile workforce
ane is an all-star employee – the
best operations executive your
business ever had. But her hus-
band’s job just got transferred out
of state. Do you watch her walk
away, hoping you can replace her
with someone just as good? Or do
you hold on to the talent you have and
allow her to work remotely?
While this may seem like a slam dunk de-
cision on the employer’s side, there’s a
lot more to consider on the tax side than
simply setting up payroll in a new state.
WATCH OUT FOR THESE FINANCIAL
IMPLICATIONS
So, what exactly could happen if you
employ someone in another state?
Nexus, or sufficient physical
• Nexus.
presence, can be created for a variety
of reasons (not just adding someone
from another state on your payroll). As
a result, nexus can have serious impli-
cations on your business. Because it
effectively subjects you to the state in
question’s tax laws, nexus opens you
up to a lot of risk and legal implications.
HOW TO KNOW IF IT’S A GOOD MOVE
The administrative costs (time and
money) may be too great to justify
a mobile workforce for some em-
ployers, but many businesses find
these arrangements to be perfect
for helping them meet their objec-
tives. Furthermore, there are lots of
benefits to having employees work
remotely out of state, chief among
them – retaining great employees. But
without considering all angles, how
do you know if it’s the best decision
financially for your business?
to people in a payroll function
• Talk
– either within your company or per-
haps an outside advisor. These indi-
viduals should have a solid handle
on the payroll considerations and
tax implications of remote employ-
ees. They should be able to help you
make an informed decision.
HR professionals about the
• Train
pros and cons of sourcing candidates
outside of your business’s local
geography. Be sure your HR team
understands the potential financial
impact that hiring someone in a different
state could bring to your business.
a centralized mobile work-
• Create
force. If you find that hiring remote
workers is the best move for your
business, pick a state that you’re
considering to expand into and search
for candidates within that state. Or try
to contain your remote hires to just
a few states instead of adding a new
state with each new hire.
NEED HELP?
If you find yourself desiring to hire remote
workers, stop and consider all of your
options before proceeding. Send me an
email to learn more.
audit risk. Once you hire
• Increased
an out-of-state employee, you’re ex-
posing your business to a whole new
level of risk of being audited for sales
or use tax. Oftentimes, hiring an out-
of-state employee will actually trigger
an audit, which will likely reveal nexus
from previous years. An auditor might
not only take issue with your payroll
withholding, but with your income,
franchise, sales and use tax.
Your ability to compete. A require-
• ment
to begin collecting sales tax or
paying income tax in this new state
may force you to increase the price
you charge for your products and ser-
vices in that particular state. Because
you will have a harder time competing
from a price perspective, you may find
yourself with the short end of the stick
compared to other businesses in a tar-
geted marketplace.
Learn more about nexus and how it can impact your business by listening to
episode 105 of unsuitable on Rea Radio at www.reacpa.com/episode-105.
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