By Payroll and Entitlements Editorial Staff
Senators have introduced the "Remote and Mobile Worker Relief Act of 2020." The act would limit the authority of states or other taxing jurisdictions to tax wages and other remuneration from employment in other states or taxing jurisdictions. A similar bill was introduced in the U.S. House in 2020.
How is taxing authority limited? The act states that no part of wages and remuneration earned by an employee working in more than one taxing jurisdiction will be subject to income tax in any taxing jurisdiction other than the taxing jurisdiction:
- of the employee’s residence; and
- where the employee is present and performing employment duties for over 30 days during the calendar year when the wage or remuneration is earned.
For calendar year 2020, employees working in a different taxing jurisdiction than their residence because of the COVID-19 public health emergency will need to perform duties for over 90 days to be subject to a taxing jurisdiction.
Who is considered an employee?
An “employee” has the same meaning given to it by the taxing jurisdiction where the employment duties are performed. However, the term “employee” will not include:
- professional athletes;
- professional entertainers;
- qualified productions employees; or
- certain public figures.
Are there provisions for the coronavirus pandemic? Further, the legislation creates a special "covered period" due to the COVID-19 pandemic. The period means, with respect to any employee working remotely, the period:
- beginning on the date the employee began working remotely; and
- ending on the earlier of the date the employer allows the employee to return to their primary work location and not less then 90% of their permanent work force to return to the work location, or December 31, 2020.
During the "covered period", for employees working remotely in a taxing jurisdiction:
- any wages earned by the employee during the period shall be deemed to have been earned at the primary work location of the employee; and
- if an employer, at its sole discretion, maintains a system that tracks where the employee performs duties on a daily basis, wages earned by the employee may, at the election of the employer, be treated as earned at the location in which the duties were remotely performed.
An out-of-state business with employees working remotely in a jurisdiction during the covered period will not be subject to any registration, taxation, or other related requirements for businesses operating in the jurisdiction. The employee working in the jurisdiction will not create any nexus or establish any minimum contacts or level of presence.
For purposes of apportioning or sourcing receipts or income, any duties performed by an employee of an out-of-state business while working remotely during the covered period, will be:
- disregarded with respect to any filing requirements for the tax; and
- apportioned and sourced to the tax jurisdiction which includes the primary work location of the employee. (S.B. 3995, as introduced in the U.S. Senate, June 18, 2020).
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