Employee moving to a different state
Joshua Lowry (Controller, Real Estate One)
| Jun 22, 2010We have an employee that is moving to Tennessee from Michigan. We don't have nexus in Tennessee and don't do business in Tennessee. This employee will be working remotely. Tennessee does not have an income tax, so there is no registration for that.
Is there anything we need to be aware of for this type of setup?
Would the employee be better classified as a consultant even if they're doing basically the same job?
Thanks,
Josh
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Answers
Company:
Their classification as employee vs. contractor may be less important than what, exactly, they are doing for you. Sales and Marketing personnel will often trip nexus issues, and other types of employees can as well. This is really an area where you should call your tax advisor before guessing at the right result. There is an intersting article on nexus here: http://www.journalofaccountancy.com/Issues/2002/Nov/TheSurprisingBenefitsOfNexus.htm.
Company: Real Estate One
Thanks for the response Mark, and the link.
Company: National Center for Employee Ownership
If your employee has equity compensation awards, such as stock options or restricted stock with vesting requirements, when you speak to your tax advisor about the mobility issues mentioned by Mark, be sure to inquire about any adverse tax consequences that might be triggered around equity compensation awards, too. Sometimes state jurisdictions claim the gain on the awards at vest as taxable income when vested while the award recipient is resident in the state, even if the work is performed outside of the state.
Company: D-Tools
You need to also be aware of unemployment benefits reporting and possible sales tax reporting requirements in a state where you have a remote worker, even if they don't have a state income tax. I agree with Mark that you should check with your tax advisor before guessing at the right result.