Hiring a Remote Team? Double-Check Your Taxable Presence.
Free on Thursday, March 31, 2016? Join us for our next #SococoLife webinar: Tax & Financial Tips for Distributed Teams. We’ll take a look at financial management, employment tax issues and related concerns for distributed teams. You’ll get tips about managing overhead costs for remote workers, talk about technology stipends, wade through the tax and regulatory considerations that must be made for remote workers, and more. This is one webinar you can’t afford to miss!
You’ve found the perfect candidate, but they live outside the state in which your business is incorporated.
No worries, right? There are plenty of platforms that offer communication, project management, and performance tracking for your remote workforce. Our team loves using Sococo’s digital office environment as a homebase throughout the day.
But here’s the thing.
Have you heard of nexus? If not, you might want to read on.
While nexus, or the presence a company has within a U.S. state, can be befuddling for many growing companies, it’s important to understand 1) what it is and 2) how it will impact your business as you hire more and more remote employees.
- The term nexus is used in tax law to describe a situation in which a business has a “nexus” or presence in a state and is thus subject to state income taxes and to sales taxes for sales within that state. Nexus describes the amount and degree of business activity that must be present before a state can tax an entity’s income. If a taxpayer has nexus in a particular state, the taxpayer must pay and collect/remit taxes in that state.
Generally speaking nexus (of all tax types) is determined by one or more the following criteria being met:
- The company has physical presence (whether it be people or equipment) within a state
- The company employs a resident of the state (including those working at home)
- The company solicits business within the state
So by hiring an employee of another U.S. state, you’re effectively creating a taxable presence within that state through nexus.
Is this a bad thing?
Not necessarily. At the very least, it creates some more paperwork for your company. You may need to hire a Registered Agent ($100-$200/year) and register with the Secretary of State ($0-$ 300/year) because the states want to know you’re there. Further, you’ll have to register with the Department of Revenue and the Unemployment Commission for withholding and sales and use tax and unemployment taxes (if applicable).
There isn’t much more tax due, but rather you are allocating the tax due amongst different states. Your payroll provider should be able to handle the processing and filing forms. Every state is a little different, so you’ll want to consult your payroll provider / tax accountant for specific steps.
Questions? Join the next #SococoLife webinar.
The Summit CPA team has (graciously) been invited to take part in the next #SococoLife webinar, Tax & Financial Tips for Distributed Teams, where we’ll be answering live audience questions about topics like financial management and employment tax issues and concerns for distributed teams.
We’ll share tips about managing overhead costs for remote workers, talk about technology stipends, wade through the tax and regulatory considerations that must be made for remote workers, and more.
If you’re a growing distributed team, this is one webinar you can’t afford to miss!
Sign up for it here.