Monday, April 28, 2014

The Mobile Workforce SIT Simplification Act: Fixing The Conundrum of State Nonresident Payroll Withholding Rules

Image Source: Tax Foundation blog,
"Pennsylvannia Urged Not to Tax
Out-of-State Responders" 3/11/14
Federal Legislation With State Taxation Impact:  On April 29th the U.S. House Judiciary Committee will hold a hearing to discuss a federal solution to the lack of uniformity that exists among states as it relates to an employer's responsibility to withhold state income tax from the wages of its mobile workforce in non-resident states. 

One reason this federal legislation is being seriously considered stems from the fact that many companies are expanding their multi-state (and international) footprint. This expansion is often accompanied with the deployment of a mobile workforce, and a requirement to withhold and remit state income tax on the wages of employees who perform services in non-resident states.  

As states continue to search for revenue sources and, some would argue, transfer their tax burden to out-of-state business and individual taxpayers; non-resident payroll withholding is an area that employers who wish to be compliant cannot ignore. Unfortunately, as is the case with state laws in general, there is a lack of uniformity regarding when an employer must withhold in non-resident states. While some states provide for either a day or dollar ‘di-minimus’ threshold, the majority of states require employers to withhold from the very first day or dollar earned in the state. This lack of uniformity requires employers that deploy a mobile workforce to comprehend and apply a patchwork of state rules. 

Additionally, while both in-house corporate tax professionals charged with state tax responsibilities and external State and Local Tax (SALT) advisors are quick to note that deploying a mobile workforce into multiple states may create nexus for corporate income, franchise, sales & use and other entity level business taxes, many tax professionals are less likely to focus on a company’s responsibility to withhold on the wages of employees who perform employment duties in non-resident states even though this lack of compliance presents the same potential for exposure and penalties. 

What Are the Issues with Nonresident Payroll Withholding and What Will the Federal Mobile Workforce Legislation Do? 

Recently I authored an article that was published in the March 2014 issue of the Institute for Professionals in Taxation (IPT) Tax Report.  The article, aptly entitled "State Nonresident Payroll Withholding Rules Present Complexity to Employers that Deploy a Mobile Workforce - Is It Time for a Federal Mandate?" provides an overview of the non-resident payroll withholding rules and highlights how the lack of uniformity creates complexity for employers that wish to be compliant. 

Some of the specific topics I cover in the article include a discussion of the various thresholds employed by states currently (e.g., days exceeded, dollars earned) and how the rules within some states are inconsistent with the regards to the requirement to withhold on and the requirement to report non-resident wages, as well on an employee’s requirement to file a non-resident tax return. For instance, in some states even if an employee’s wages have not exceeded the threshold to withhold, the employer may still have a requirement to report  the non-resident’s wages to the state.  Similarly, a failure to withhold (because a threshold has not been exceeded) does not necessarily mean a employee is not subject to the same state's non-resident income tax filing requirements.

The article also discusses the Mobile Workforce State Income Tax Simplification Act of 2013 (H.R. 1129 / S. 1645), the federal proposal whose merits the House Judiciary Committee will debate on April 29th. (Note, the Judiciary Committee’s April 29th hearing will focus on the House version of the “Mobile Workforce” legislation - H.R. 1129. A companion bill was also introduced in the Senate on November 5, 2013, S. 1645, which is also titled the Mobile Workforce State Income Tax Simplification Act of 2013.) Thus, I also provide an overview of the provisions of H.R. 1129 in the article and discuss how the proposal, if enacted, would limit a State’s authority by imposing a uniform “days exceeded” threshold before a State could subject a non-resident employee to the state’s personal income tax and his employer to the State’s non-resident withholding and reporting requirements.

If you're following this development and would like to gain a better understanding of the issues and the specific provisions in the Mobile Workforce State Income Tax Simplification Act of 2013, I invite to download and read my recent article:

Sylvia's Summation

Will Mobile Workforce SIT Simplification legislation be enacted by the end of 2014? The Mobile Workforce State Income Tax Simplification Act of 2013 (H.R. 1129/S. 1645) has received the strong backing of numerous prestigious professional organizations, including the American Institute of Certified Public Accountants (AICPA), the Council on State Taxation (COST) and the American Payroll Association (APA) - organizations which have relentlessly supported prior similar proposals. However, the 113th Congress has been presented with several federal proposals which also focus, to some degree, on limiting or expanding State authority, such as the Marketplace Fairness Act of 2013 (S. 743/H.R. 684), the Business Activity Tax Simplification Act (H.R. 2992), the Digital Goods & Services Act (S. 1364) and the Permanent Internet Tax Freedom Act of 2013 (H.R. 434/S. 31). With only a little more than eight months remaining in the current Congressional session, it will be interesting to see where Congress turns its efforts.


Missed my last post? Catch it here: The Massachusetts Tech-Tax Fiasco - Good Policy, Bad Policy or No Policy Connection? 

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Friday, January 31, 2014

The Massachusetts "Tech-Tax" Fiasco - Good Policy, Bad Policy or No Policy Connection?

In a few months, I'll be presenting at a Cloud Services and Digital Goods Symposium - Avalara's Sales Tax Horizons 2014. I'll be a part of three member Policy Panel speaking on "Where We Are Today with Technology Tax Legislation.

Of course I'm thrilled to have been invited to participate in this upcoming "First of its Kind" Tax Forum. One reason is that state tax policy is an area I follow very closely! Now I won't spend a lot of time talking about state tax policy in this post as I'd love to devote an entire post to that topic in the future. 

But this did get me to thinking about an article I recently authored for the Institute for Professionals in Taxation (IPT) Tax Report. In that article, titled "The Massachusetts 'Tech-Tax' Fiasco: It's History, Impact and Valuable Lessons Learned," I provided an overview of a controversial tax provision enacted last July (2013) as part of a Transportation Funding Bill, which would have expanded the Massachusetts 6.25% sales tax to computer software design and certain software modification services. Not only was the new tax provision both vague and complex, its enactment took many in the technology and business community by surprise, was seen as targeting a vibrant sector of the Massachusetts economy, and because it was effective only seven days after its enactment, it soon became the subject of widespread criticism. This led to a successful "grass-roots" effort to have the technology tax legislation repealed less than two months after its effective date.

Although the tax provision is no longer in effect, it remains an example of a bad tax policy approach, or should I say, an example of a "no tax policy connection."  You see, good tax policy often suggests that the object or persons being taxed have some connection to the desired outcome. This is the reason why cigarette taxes are so high (to potentially encourage the cessation of smoking) and why when Colorado legalized the use of recreational marijuana, it also enacted an additional 15% sales tax on the retail sale of marijuana. 

But where Massachusetts' "technology tax" was concerned, there was no viable policy connection. This was a tax on "technology" intended to fund current and future "transportation" needs - roads, bridges, buses and subway trains.  In the end the policy connection just wasn't there! 

Sylvia Summation

Ah, the Massachusetts "Tech-Tax" fiasco!  An example of a bad or "no connection" policy. With States continuing to search for new revenue sources, it's likely - though unfortunate - that we'll see similar legislative "fiascos" occur in other states. Here in Massachusetts, our legislators learned valuable lessons - but will other state legislatures take notice?

By the way, you can read and/or download the entire article from my firm's website, by clicking on the article title in the post above or here:  

"The Massachusetts 'Tech-Tax' Fiasco: It's History, Impact and Valuable Lessons Learned"

You can also read more about the Massachusetts "technology tax" (now repealed) at my prior "Buzz" post:

"Sales Tax on Computer Design, Software Modification Services: Massachusetts Issues Initial Guidance, Yet Questions and Challenges Remain"


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Thursday, September 12, 2013

2013 New England State and Local Tax Forum: The Nation's Top SALT Experts Presenting on the Hottest SALT Topics

The nation's top SALT leaders
speaking on the hottest SALT topics
The State and Local Tax (SALT) landscape is evolving at an increasingly rapid pace, fueled by a variety of factors, such as the expansion of states’ interpretation of what constitutes "nexus" for various types of state taxes; the impact of technological advances and the challenge this presents to state tax officials who must apply outdated rules to new "products" and business models; attempts by states to expand the sales tax base to services; and the push by state governments and certain business proponents to involve the U.S. Congress in setting standards that would impact state tax administration.  

Without a doubt, it's becoming increasingly important for SALT professionals – both those who advise clients with multi-state operations, as well as those charged with the responsibility of managing their employer’s SALT function – to stay up-to-date on evolving SALT trends.

The New England State and Local Tax Forum* will once again be presenting its 2013 Annual State and Local Tax Forum (Conference)If you’ve attending a prior NE SALT Forum, you’re well aware that this is a not-to-be-missed, quality conference featuring some of the nation’s finest and most respected SALT speakers presenting on some of the hottest and most challenging SALT topics.

This year will be no exception! Speakers and topics will include:

  • Renown SALT Authority, Professor Rick Pomp, and Rath, Young & Pignatelli SALT partner Christopher Sullivan, recapping the nation’s top state tax cases and controversies of the last year.
  • Executive Director of the Multistate Tax Commission, Joe Huddleston, moderating a “State of the States” panel comprised of State Tax Revenue Officials from each of the six New England States.
  • President & Executive Director of the Council on State Taxation (COST), Douglas Lindholm, and Tyco International’s Senior State Tax Director, Paul Buchman, reporting on issues and trends relating to the deployment of a mobile workforce, including an update the Mobile Workforce State Income Tax Simplification Act of 2013 - federal legislation that will impose uniformity standards on states.
  • KPMG’s Washington National Tax Managing Director, Harley Duncan, and PwC SALT Partner, Susan Haffield, presenting on State’s attempts to expand the sales tax base to services, including an update on the taxation of cloud computing.
This is just a sampling of what’s in store for the day-long conference. There will be many more timely and excellent presentations on topics such as SALT controversy and procedure, the State’s use of discretionary authority, and the top sales and use tax issues of the year.

So when is this "not-to-be-missed" event? 

The 2013 Annual New England State and Local Tax Forum will be held on Friday, November 15, 2013, from 7:30 a.m. to 4:30 p.m. at the Boston Marriott Newton, 2345 Commonwealth Avenue, Newton, Massachusetts 02459. (For returning attendees, note that this is change in venue from last year’s conference.)

Whether you're a SALT professional based in New England or anywhere in the country, you won't want to miss this innovative and thought provoking conference!!  I know I’ll be there!

Registration Information:   For more information about the 2013 Annual State and Local Tax Forum, including information on registration fees (early registration ends 10/15/13), firm discounts, hotel information or to register visit the conference website at:  Inquiries can also be e-mailed to:, or

Spread the word:   If you’re planning on attending, please consider sharing this update via your personal, professional, firm or corporate social media account, e.g., LinkedIn, Twitter, Facebook, etc. (You'll find social media share buttons and a "Share This" icon at the bottom of this post for easy posting. Note that using the hashtag #2013NESALTForum on Twitter will allow others to easily follow your twitter updates related to the 2013 Annual New England SALT Forum.).

Also please consider linking to this post on your professional, firm or corporate blog. This can be easily accomplished by linking to the post URL:


*The New England State & Local Tax Forum is a non-profit organization formed to promote, encourage, assist and foster education in the area of state and local taxation and tax policy. The Forum was founded by Stan Arnold, formerly, the Commissioner of the New Hampshire Department of Revenue. The Forum’s primary activity is to organize and promote an annual, technically focused, in-depth conference covering significant SALT issues from across the country, with a particular focus on the New England states. For more about the organization visit the conference website at:


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