Once again, Bloomberg Tax has surveyed the state tax departments (including D.C. and NYC) and asked about their stance on important state tax topics. The purpose of this survey is to provide clarity to a state tax landscape which is otherwise infamously known to be “clear as mud”.
It is important to note that the responses to this survey does not hold legal bearing as it is not official guidance passed by the state legislatures. Rather, the responses should be considered merely indicative of a state’s view on a particular topic should there be no official law/guidance published by the state.
Since the onset of the Covid-19 pandemic, remote work and hybrid employment arrangements have significantly increased across various industries. However, this transition to remote work presents additional complexities concerning state income tax regulations.
It should not be assumed that states are in full alignment on the issue of nexus. None of the requested activities had unanimous responses from the states, but most states viewed the following activities as triggering nexus for state corporate income tax purposes:
- Work remotely from the state
- Reimbursed for cost of in-home office in the state
- Perform back-office admin work from the state
- Perform product development functions from the state
- Remotely hire, supervise, or train employees from the state
These activities are commonly performed by employees but can also be outsorced to independent contractors which similarly can trigger nexus.
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*Nexus is the term used to identify a minimum contact with the state sufficient to trigger a tax filing obligation.
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