How do you do taxes for something like this?
Like lots of employees working in lots of different states/countries, no “home base”.
Is there an easy way to do it?
Like lots of employees working in lots of different states/countries, no “home base”.
Is there an easy way to do it?
In a nutshell, having an employee in a tax jurisdiction creates a taxable nexus for the company, meaning that they can be subject to income taxes, commercial taxes, sales taxes/VAT, etc., in that jurisdiction. (And note: this has been part of domestic and international tax law for decades.)
For example: Company C in CA has an employee, E, who moves to NY to work remotely. Company C is now subject to NY income taxes, and must now collect NY sales tax if they have any sales to NY customers (though note: in the US many states now require sales tax collection even in the absence of physical presence, so C may already have been obligated to collect NY sales tax). If E is a programmer, the NY income tax exposure is probably very low, but if E is in sales, they could be looking at significant NY tax liabilities based on how they may be required to apportion (aka allocate) their income between CA and NY.
If E is a salesperson is it complicated because they’re bringing contracts to C in NY or because they might work on Commission?
[1]https://www.scotusblog.com/case-files/cases/new-hampshire-v-... [2]Which is already subject to sales tax after the reversal of the Quill Corp vs. North Dakota decision in South Dakota vs. Wayfair
ADDED: So I guess (although it's not super-clear) that it's a matter of being officially assigned to an office and maybe going in semi-regularly. Presumably if someone is 100% officially remote at a company with many offices, it wouldn't apply. https://andersen.com/pressroom/telecommuters-beware-of-state...
The you'd be surprised what certain states would say, do, and compose in their legal briefs to justify extracting as much money as possible.
Also IANAL, so take what I have to say with a grain of salt.
Presumably, there could be some kind of test. If someone lives in NH but is 100% WFH, he may be subject to MA income tax under the following standard:
1) If the company is headquartered or incorporated in MA
2) If the work done is provided (a) to directly benefit operations of aforementioned company that are affiliated with a location in MA or (b) to be sold/provided to third party legal person(s) for which business operations /purchasing/selling would be done in MA. (i.e a business/service nexus)
Otherwise, no. Most places in the U.S., you are treated as earning the income where you are actually physically located (i.e., your home residence).
Generally, you only have a location-specific business created if there are location-specific benefits acquired, or benefits avoided, by doing so. (Like say, access to tax credits, or avoidance of certain compliance responsibilities).
If your employees reside in a US state, you usually have additional obligations there related to state income tax withholding or state unemployment insurance, as applicable.
Note that a "foreign business" is a technical term in this context, simply meaning that a business operating in one state that is incorporated in another state. (See for example https://www.californiaregisteredagents.net/incorporation/for...) For example, almost every YC company is incorporated in Delaware, but is registered as a "foreign business" in CA where they are physically headquartered.
At the international level you usually form subsidiaries, due to the vast differences between laws at the national level, but some companies will simply register a "branch office" in other countries in which they have small operations. In fact, many countries, like the U.S., have tax forms specifically for these companies: the Form 1120F...