As employers and employees begin to return to some version of normalcy, many lenient tax policies will be coming to an end. For employers that continue to maintain a remote workforce, there could be implications for the employer on both the state and local tax front. Below are a few of the tax implications employers should consider.
Generally speaking, remote workers trigger “nexus” for purposes of various business taxes, including Pennsylvania’s corporate net income tax (CNIT) and various local business privilege taxes, such as Philadelphia’s business income and receipts tax (BIRT). Nexus is the minimum constitutionally required connection a taxpayer must have to a taxing jurisdiction to allow that jurisdiction to impose its tax upon the taxpayer. During the pandemic, states were inconsistent in their approach to the question of whether workers forced to temporarily work remotely due to the health crisis created nexus—some states proclaimed there was no nexus waiver, some issued a temporary nexus waiver, while many remained silent.