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2 Replies Latest reply: May 10, 2010 12:00 PM by bpfinance RSS

If I have employees in all 50 states, must I register

Currently Being Moderated all 50 states?
Would be interested to hear what others are doing.
  • Re: If I have employees in all 50 states, must I register
    dexvert Newbie
    Currently Being Moderated
    State Withholding Tax
    An employer is not required to withhold state income taxes for states where the employer does not have nexus. Did you mean that you have employees working or residing in all the states? If you have employees working in the state, then you are required to withholding if the state has an income tax imposed on earned wages. If you only have employees living in a state and working in another state, you are not required to withhold the resident income tax for the resident state AND your company has not created nexus in the resident state. Each state has its own definition of how a business connection is created with that state.

    In the withholding context, the employer's concern is whether it has a nexus (business
    connection), or any operations, within a state. If it does, it is subject to the
    withholding laws of that state. This will make the difference in whether an
    employer has to withhold income tax for an employee's state of residence even
    though he or she performs no services there.

    APA's book on Payroll Issues for Multi-State Employers (page 3-10) talks about nexus.
    If an employer does not
    have nexus in a state for which on of its employees will have a personal income
    tax liability, it can choose to establish a withholding account in that state
    and begin withholding as a courtesy to its employees. However, the payroll
    department should check with the corporate tax and legal departments of the
    company first because once you voluntarily register for one tax, you may receive
    inquiries from the state about other taxes for which you are not liable, such as
    sales tax or corporate income tax. Also, in some states, withholding and paying
    over the taxes may thereby establish nexus, making your company open to being
    sued in the courts of that state.

    Courtesy withholding is a good service to employees, however, employers must be aware of potentionally opening up the entity to further administrative and tax liability burden in the state. Entities generally try and 'stay out' of states such as AL, PA, and OH because opening up an account in these states for voluntary withholding can create nexus for the entity and subject it to other taxes such as a business privilege tax.

    _*State UIf you have employees working in the state, then you are most likely liable to pay the State Unemployment Tax for that state. Also, some states have State Disability Insurance tax that are based on where the employee works.

    Other Taxes
    Some states have other employer taxes and license fees. Some states also have local income tax withholding requirements. You must check with each state.
  • Re: If I have employees in all 50 states, must I register
    bpfinance Novice
    Currently Being Moderated
    Are you operating in all 50 states? What exactly are those employees doing in those states?

    Do you mean register as a foreign entity in those states, or register for payroll taxes?

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