Tax Consequences Holding You Back From Deploying A Remote Workforce? As remote work continues to overtake the traditional workforce, organizations must understand state and local tax considerations for their remote employees before adopting such a policy. Due to quick changes in the work environment and work-from-home arrangements many tax consequences that may result in your business reconsidering the deployment of a remote workforce. Fortunately, state and local tax leader and a principal with Rea & Associates, Kathy LaMonica, will be on hand to explain what businesses are up against. She will also be taking your questions throughout the presentation. Read on to discover what you will hear during this free, hour-long webinar. State & Local Tax Guidance To Guide Your Remote Workforce Decision Join Rea & Associates for a free, hour-long webinar to gain insight on tax law updates, remote work implications, what land mines you need to be aware of when registering for payroll taxes in new states, and more. During this event, you will: - Gain insight on the Wayfair decision, and recent updates that may affect your business 3 years later. - Take a deep dive into the State and Local direct and indirect tax concerns when hiring remote workers. - Receive an update on Ohio Municipal Tax legal challenges. - Tune in for predictions of where the states may be headed with the taxability of services and digital products, and how that may affect your compliance requirements. - And more! Kathy, an income principal on the firm's state and local tax team, focuses on sales and use tax consulting, compliance, and implementing technology solutions for businesses and organizations that continue to struggle with the various tax laws found throughout the nation. Since COVID-19 emerged and the topic of working remote took center stage, she has been tracking the implications associated with deploying a remote workforce. You won't want to miss this one! #ReaCPA #State&LocalTax #RemoteEmployees

3. Migration of the Work force
• From CNBC study from late 2020, an estimated 14M – 23M Americans
are planning to relocate to a new U.S. city or region on a permanent
basis.
• Driven by Covid, initially, companies are understanding the benefits
of a remote workforce, including lower operating costs, increased
employee availability and job satisfaction.
• Companies of all sizes are adopting a remote work policy.
• Survey from Intermedia, 57% of small and medium-size businesses
plan to offer remote work (“work from anywhere”)or
hybrid/flexible plan.
• Recruiting from out of the area
• Keeping great talent – by allowing them to work where they
want.

5. State Tax issues with a Remote Workforce
• Does a business have “nexus” in other states?
• Business subject to sales, income, franchise, property tax?
• Sales sourcing Issues for income tax and apportionment
• Taxability of products & services
• Is the business (employer) required to withhold state and local income
taxes for remote employees?
• In Ohio – other city taxes?
• What about worker’s comp, unemployment insurance?
• Is the employee required to file additional tax returns? Are they aware
of the new filings and withholding requirements?

6. Nexus
• The term "nexus" is used in tax law to describe a situation in which a
business has a tax presence in a particular state. Nexus is basically a
connection between the taxing authority and an entity that must collect
or pay the tax.
• Physical Presence (employees, warehouses, inventory)
• Economic (Wayfair)
• Other nexus defined

7. Physical Presence
• Remote Workforce (permanent or temporary)
• Instant Nexus for Sales Tax, Income Tax (some protections under PL
86-272), Franchise Tax, Gross Receipts
• Sales Reps
• Third-party subcontractors/consultants
• Warehouses/Offices
• Inventory - Amazon FBA (Fulfillment)
• Delivery in company-owned trucks

8. Covid Emergency Regulations –Employee
triggering nexus
• Some states – said temporary remote employees would not trigger nexus for
sales tax or corporate income tax.
• Temporary exemptions generally in place while emergency orders in place.
• Once lifted – standard physical presence rules in effect.
• Payroll Taxes –
• Withholding at other states required – unless there was an exemption due
to Covid, reciprocity agreement, or no income tax.
• Some states have “convenience of the employer” rule – withholding based
upon the location of employer’s office. (AR, CT, DE, MA, NE, NY, PA)
• NH vs. MA Case – US Supreme Court refused the case. Mass
employers withholding MA tax on employees working during COVID in
other states such as NH.
• Most states did not provide guidance at all or emphasized that COVID made no
difference to either Nexus or Withholding responsibilities.

9. **Ohio Municipal Income Tax Update –
Remote Employees**
• June 18 – Covid-19 State of Emergency was lifted.
• HB 197 Protections would have been lifted effective as of 7/18/2021.
• However, Gov. DeWine – signed budget into law – allowing for a partial win for
all parties.
• Employer: Extends protections until 12/31/2021. Allows the employer to
withhold at employer location city.
• Need a plan going forward as of 1/1/2022 – for employees intending
to make a permanent remote work situation.
• Normal 20-day withholding rule will apply where the employee is
working.
• Employees:
• Allow qualified employees to receive a refund of taxes withheld to a
municipality where they neither lived nor physically performed
services for calendar year 2021. No refunds allowed for 2020 at this
point, as the courts will decide this.

10. Income tax withholding “Friendliness” –
Under normal conditions

11. Wayfair – 3 years later
Florida: Effective 7/1/2021 ; Missouri: Effective 1/1/2023; Kansas: Updated to standard

12. Marketplace Facilitator Laws

13. Other Nexus Standards
• Cookie Nexus – MA – overturned, Ohio eliminated after economic was
imposed.
• Affiliate Nexus – repealed in CA, CO, AR
• Click through Nexus repealed in AR, CA, CO, OH, WA, IL – but then IL
added it back in.

14. What about B2B & Service Providers?
• Continue to see B2B (i.e. manufacturers, distributors, wholesalers) &
Service Providers hesitate about having to comply with economic nexus
rules.
• If my sales are not taxable (i.e. sales for resale or exempt services),
why do I need to register and comply?
• But some states still do require it – and its necessary to have
exemption certificate management tools.

15. Once Nexus is established….
• Taxability of Products & Services – sales tax compliance
• Varying rules from state to state
• Sourcing of income – income/franchise tax compliance
• Past Risk & Exposure
• VDA’s & registration
• Payroll tax compliance
• Compliance going forward, outsourcing, software

16. A Perfect Storm
• Wayfair – out 3 years
• Remote employees triggering nexus
• Aggressiveness of states – not only for enforcement, but expanding tax
base, taxability of services/digital products
• Innovative analytics and sharing information to find taxpayers, nexus
questionnaires, “phishing”
Clients need to get ahead of it and figure out what landmines might be
waiting, and how to mitigate additional costs associated with remote
workforce.

17. Aggressiveness of States
The director of the Multistate Commission came out recently in a white paper
about remote sellers:
• “It is likely that less than half of remote sellers are complying with Wayfair
rules”.
• More states are getting aggressive about collection
• Active enforcement strategies for targeting remote retailers.
• Arizona bringing in private data analytics company to identify non-filers
• Time is running out for businesses to get compliant before the state finds them.
• State are expanding tax base:
• VT taxing food
• NE adding certain services to taxable base
• MD & CO – Digital Advertising & Digital Product/Streamed Products
• Banner advertising
• Search engine advertising
• Access to/use of video/online games
• Digital downloaded or streamed content
• Georgia, Kansas, Wyoming (adding taxes), Maine (raise the rate)
• WV – looking to add internet sales fee – to counter the decline in traditional
brick and mortar sales – unlikely to pass.

18. Aggressiveness of States
• Another Poll of CPA/Accountants suggested that “98% of small
businesses are failing to fully comply with all the interstate sales tax
issues they may be liable for.”
Gone are the days for waiting for the states to find me, they are finding
taxpayers, and by allowing employees to work in other states – opening
the door to unexpected issues.

19. Test Case
• Ohio based company has personnel moving to 5 different states.
• Company sells Tangible software & Computer services
• Software may or may not be taxable in those states (electronically delivered, SaaS)
• Services may or may not be taxable (set-up and implementation, true
management services)
• Employees are using laptops/equipment/software – that may be taxable –
multiple points of use (buy in OH – used all over the US)
• Property tax concerns in certain states
• Employee withholding – payroll tax, UI, worker’s compensation
• Questions:
• Did business have nexus before employee moved there?
• Physical – or did they meet sales thresholds
• Do they have past tax exposure/risk?
• Were they ever contacted by state?
• Are they eligible for VDA?
• Do they have internal systems to handle new complexities for sales tax collection,
filing, tax determination
• Do they have people to handle new multi-state compliance responsibilities?
• Can they outsource?

20. Calculating the costs
Pass through Costs/Expenses
• Sales tax on customers, pass
through to State
• Income tax withholding,
employees
Taxes/Expenses on the
business
• Income and other direct taxes
(franchise, gross receipts, BPT,
B&O)
• Property, Unemployment
Insurance
• Software/Technology to handle
the sales tax, payroll tax
• Outsourcing, dedicated
employee

21. Why should we comply?
• A lot of small business that are considering selling in the next few years
– buyer companies are doing their due diligence on State Tax side of
things.
• Successor liabilities
• If a state finds you – there is little room for waiver of penalties and you
can’t go back to customers for the taxes and interest.
• There is no statute of limitations if you have physical presence
factors going back years.
• States have unique and aggressive ways of finding you.
• Audit your customer/vendor
• Data analytics
• Sharing information between states and tax departments
• Amazon FBA

22. Action Plan
• Evaluate systems – software, processes, personnel.
• Determine nexus footprint – prior to registering in new states for any
states.
• Determine taxability considerations for sales tax.
• Registrations/VDA’s – considering past exposure.
• Have a process for adding new states – as employees look to move.
Complicated issues/complex state tax rules – need to get experienced SALT
professionals involved to guide and assist with decisions.