![]() This approach is more viable when a law firm has had other offices established prior to the pandemic in multiple states. One consideration is to assign lawyers to offices in states that do not utilize the convenience-of-the-employer rule. New York’s position is that even though the employer told the employee not to come into the office, the convenience rule still applies and all wages should still be considered New York-source income. New York has taken the position that the employer should still withhold New York wages if the employee is working remotely for any reason other than the employer’s necessity to be working from that specific location. As an example, assume an employee is assigned to work in the New York office, and is working remotely from a state like New Jersey. The presenters discussed how the convenience-of-the-employer rule applies and some possible ways to minimize exposure. States that have the convenience of the employer rule include Connecticut, Delaware, Massachusetts, Nebraska, New York and Pennsylvania. The presenters also discussed the applicability of the convenience-of-the-employer rule during the COVID-19 pandemic. Notable states that terminated their safe harbor provisions include California (expired on June 11, 2021), Connecticut (applied its nexus safe harbor only to the 2020 tax year), Maryland (expired August 15, 2021), Massachusetts’s (expired 90 days after June 15, 2021) and New Jersey (emergency relief set to expire on October 1, 2021). Some states began terminating their safe harbor provisions either by statute or with the expiration of the state’s declared state of emergency legislation. Gary also reminded the listeners that although states may have these emergency provisions in place, law firms should not forget about economic nexus issues, which could create nexus for the firm. Bill concluded that although not stated, the emergency relief provisions should apply to partnerships in the same effect as corporations however, this is as yet unclear. Bill questioned whether by using the term corporate tax in the state emergency relief statutes, this excluded the application of the safe harbors to partnerships. ![]() Other states did not change the application of their nexus rules or did not provide any guidance at all. Gary stated that each state’s provisions should be reviewed to determine applicability. Some of those provisions applied to one tax and not others. Toward the beginning of the COVID-19 pandemic, several states passed legislation that created safe harbors where states did not assert either corporate income tax, sales tax or withholding tax nexus for having a remote worker temporarily in the state as a result of the pandemic. However, sales tax may apply on the computers, printer, supplies and other equipment used by the remote workers in the state. ![]() As law firms provide services, sales tax is usually not an issue. Generally, hiring or allowing an employee to work remotely in a state creates income tax, withholding tax, sales tax and other applicable business nexus. The presenters discussed both technical and practical aspects of telecommuting and nexus implications. Gary and Bill discussed various issues surrounding telecommuting and nexus, apportionment, sourcing of service income, and various other tax and non-tax considerations. ![]() EisnerAmper’s State and Local Tax Group recently gave a webinar titled “State Tax Ramifications of Remote Workers for Law Firms,” hosted by Carolyn Dolci and presented by Gary Bingel and William Gentilesco. ![]()
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