On the Move with State and Local Taxes

On the Move with State and Local Taxes

Karen J. Poist, CPA | Kimberley D. Tarnakow, CPA

By the Numbers

60+ Years in AE Space

Team Members in 15+ States

Serving 1000+ Clients in all 50 states

Top 60 Value Added Reseller (U.S)

Meet Today’s Presenters

Kimberley D. Tarnakow, CPASenior Manager, AEC Tax Practice/State

and Local Tax Group

Karen J. Poist, CPADirector, State and Local Tax Group

HOUSEKEEPING

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AGENDA

Remote Workforce

Local Taxes

Sales Tax

Pass-through Entity (PTE) Elections

Are the States Looking for YOU?

Current Happenings

Remote Workforce

KAREN J. POIST, CPA and KIMBERLEY D. TARNAKOW, CPA

SALT: Remote Workforce

State Tax Risks

Telecommuting/Remote Workforce –

o State and local tax issues - employees working from states other than where their assigned offices are located

o Ability to control or know where employees are working


State Tax Risks

State Tax Issues • Nexus

oDoes an employee working from home create a business connection with another state, local jurisdiction?

Yes, constitutes sufficient “nexus”

Typically creates physical nexus

Subjects the business to the tax laws of that state


State Tax RisksState Tax Issues

• Nexus

oNew state reporting, filing and payment requirements?

Yes, once the business satisfies the nexus requirements

Income taxes, franchise taxes, gross receipts taxes, sales and use taxes, personal property taxes, business licenses and payroll taxes

Filing requirements could also be imposed at the city or county level


State Tax RisksEmployer/Employee Matters –

oProblems arise when an employee lives in one state and works in another state or when their permanent work location is in another state


State Tax RisksEmployer/Employee Matters –

oStates can tax your income where you live and where you work

oStates may also seek to tax your income even if you neither live nor work in the state – “Convenience of employer rules”

• AR (removed), CT, DE, NE, NY and PA - MA adopted a temporary income sourcing rule during pandemic, now expired 9/13/21

oStates can tax your income where you live and not where you work – reciprocal agreements

SALT: Remote Workforce –Reciprocity Agreements

SALT: Remote Workforce-State Withholding Thresholds


State Tax Risks

The Multi-State Worker Tax Fairness Act

The Health, Economic Assistance, Liability Protection and Schools (HEALS) Act

Remote Worker Relief Act of 2020

Mobile Workforce State Income Tax Simplification Act of 2021

SALT: COVID 19

COVID 19 – Emergency Orders LiftingImpacts: Income Tax Nexus

Sales Tax Nexus

Payroll Taxes

Unemployment Insurance

Workers Comp Insurance

Return and Payment Due Dates

SALT: COVID 19

COVID 19 – Emergency Orders Lifting

*As of 6/23/21

SALT: COVID 19

COVID 19 – Emergency Orders Lifting

*As of 9/27/21

POLL

ING

QU

ESTI

ON Does your company have remote

employees working from other states?YesNo

Local Taxes(Local Needs Love, too!)


SALT: Local Taxes

Local Taxes

Business Licenses/Gross Receipts tax (e.g. AL, CA, TN)

Personal Property Taxes

Occupational (payroll) Taxes

City Income Taxes (e.g. Ohio, Kentucky, Philadelphia, NYC)

Jurisdictional Sales Taxes

SALT: Local Taxes –Personal Property

Sales Tax


SALT: Sales Tax

Sales of goods by service businesses Considered a sale of goods, imposition of sales

tax

Not considered a “reimbursable expense”

Reimbursable Expenses – mileage, copying

Drop Shipments – May be subject to sales tax

SALT: Sales Tax

States that impose sales tax on AE Services

Hawaii

New Mexico

South Dakota

*Be aware of state rules and the imposition of sales tax on specific services and goods sold.

POLL

ING

QU

ESTI

ON Is your company complying with local sales tax

requirements?

YesNo

Pass-through Entity Elections


SALT: Pass-through Entity Elections


Pass-through Entity Elections:

Applies to S Corporations and Partnerships

Effective Dates – SALT Cap Expiration

All states treat this differently.

Don’t spend a $1.00 in state taxes to save $.50 in federal taxes!


Differentiators:

Mandatory vs. Elective

Method of and date of election

Tax rates

Benefits will vary on a state-by-state basis.


General Categories

Mandatory – Required to file and pay tax at entity level -CT

Group 1 States Only PTE is taxable.

PTE distributable income is not reported by individual on the applicable state return. Nonresident owners not required to file a personal return.

Group 2 States PTE is taxable. PTE distributable income is reported on individual personal

return, with a credit for taxes paid by PTE. Nonresident owners are required to file a personal return.

Are the States Looking for YOU?


SALT: Are the States Looking for YOU?

Notices are going out…

Sales Tax

Income Tax

Payroll Tax

Unclaimed Property


How will they find us?Sharing of INFORMATION - Federation of Tax Administrators-

Southeastern Association of Tax Administrators (SEATA) – AL, AR, FL, GA, KY, LA, MS, NC, SC, TN, VA, WV

Midwestern States Association of Tax Administrators (MSATA) –

IL, IN, IA, KS, MI, MN, MO, NE, ND, OH, OK, SD, WI

Northeastern States Tax Officials Association (NESTOA) –

CT, DE, ME, MD, MA, NH, NJ, NY, NYC, PA, Philadelphia, RI, VT, DC

Western States Association of Tax Administrators (WSATA) –

AK, AZ, CA, CO, HI, ID, MT, NV, NM, OR, TX, UT, WA, WY


How will they find us? Company Website

Social Media Outlets

Any Publicity

Vendors and Customers

Advertising – Company vehicles

Phishing Notices


New York

Over 149,000 audit letters have gone out since 1/1/21

Targeting individuals earning as little as $100k

Aggressively going after people who are claiming they have moved out of New York


You're Invited! - Unclaimed PropertyDE SOS sent "invitations" in February to

join the VDA program

Plan on a 2-year process. Don’t procrastinate!

UCP Phishing letters from NY and WV

POLL

ING

QU

ESTI

ON Has your company received notifications or

been “discovered”?YesNo

Current Happenings


SALT: State Current Happenings

Remote Employee Expense Reimbursement

General rule:• Federal law requires the reimbursement of work-related expenses that

drop earnings below the minimum wage threshold.

• Fair Labor Standards Act (FLSA) – Employers are not required to reimburse employees working remotely for business expenses they incur while working from home.

• States have enacted laws that require employers to reimburse remote employees’ work expenses – ALL DIFFERENT!

• Employer Written Policies – must comply


Remote Employee Expense Reimbursement

CA, IL, IA, MA, MT, NH, ND, Seattle, SD, and DC have specific laws

May not be required if working remotely is optional.

“Necessary Expense”- Anything required for the performance of an employee’s job.

May include internet, mobile data usage, computers, printers, etc.

Employee friendly states (i.e. CA or IL) may even require a portion of home utilities to be reimbursed.


Arkansas – No Longer a “Convenience of Employer State” for payroll taxes (Effective 4/21)

Wages paid working for an Arkansas employer to nonresident employees working remotely by choice were deemed Arkansas wages.

Legislation issued in April to reverse this position. Nonresidents who earn wages from Arkansas employers will only pay Arkansas tax on wages earned while physically present in Arkansas.


Louisiana – “Digital Nomads” Effective 1/1/22

“Digital Nomad”-

Individuals who establish Louisiana residency after 12/31/21

Have health coverage

Work full-time for a nonresident business

Exempts 50% of gross wages, not to exceed $150,000

Exemption applies for 2 taxable years between 2022 and 2025.

Limited to 500 individuals

Similar incentives under consideration in IL, IN, IA and VT.

SALT: Local Current Happenings

Ohio Municipal Income TaxesWithholding continued for remote workers at the site of original

workplace.

As of 2021, withholding for where employee is physically working.

Employees can file refund claims for 2021 for taxes withheld for original workplace.


St. Louis Municipal Income Tax Issued guidance to continue withholding for original workplace.

Challenged by workers.

State of Missouri tried to pass legislation to prevent, however, was unable to do so.


Philadelphia

• Currently recommending changes to the city tax code.

SALT: Taxes by State

POLL

ING

QU

ESTI

ON

Which state tax is creating the biggest headache for your company?

Income TaxPayroll withholding TaxGross Receipts TaxSales TaxLocal Taxes – Business Licenses, Personal PropertyAll of the above

Contact Information

Karen J. Poist, CPADirector, State and Local TaxStambaugh [email protected]

Contact Information

Kimberley D. Tarnakow, CPADirector, TaxStambaugh [email protected]

On the Move with State and Local Taxes

Documents

Transcript of On the Move with State and Local Taxes