Multistate telecommuting has oft-overlooked pitfalls

McAfee attorney Charlie Plumb discusses liabilities involved with telecommuting employees.
Oklahoman Modified: July 9, 2013 at 10:00 pm •  Published: July 8, 2013
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Q&A with Charlie Plumb

Multistate telecommuting offers pitfalls in taxes, unemployment

Q: Yahoo made headlines this year when company officials retracted its popular work-from-home policy. Yet despite this move from a company whose business revolves around mobile technology, many employers still allow employees to telecommute. Why?

A: Employers often permit telecommuting — whether in-state or out-of-state — as a way to retain and recruit valuable staff members, reduce employee travel time and overhead expenses, allow employees to work in an environment that heightens their productivity, and boost overall morale.

Q: Are there any liabilities associated with allowing employees to work from another state?

A: Yes. Two lesser-known areas of liability involve the payment of corporate business taxes and unemployment insurance.

Q: Aside from withholding and remitting income taxes to the proper state taxing authority on behalf of its out-of-state workers, what else should employers be concerned about?

A: Many employers may be unaware the mere presence (or residence) of an out-of-state worker may create an additional corporate business tax liability for them in the majority of U.S. states. In 2010, a New Jersey court held that an out-of-state employer owed New Jersey corporate business taxes because of the company's link with the state, despite the fact the company had no business operations or other connections with the state. In this case, the link was determined to be the employee who worked from her home in New Jersey. Only six states have clearly stated that the presence of telecommuting employees wouldn't give rise to additional tax liability. However, with telecommuting on the rise and many states challenged to find new revenue sources, don't be surprised if more states adopt this same “linkage” policy.

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by Paula Burkes
Reporter
A 1981 journalism graduate of Oklahoma State University, Paula Burkes has more than 30 years experience writing and editing award-winning material for newspapers and healthcare, educational and telecommunications institutions in Tulsa, Oklahoma...
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