Remote working across state lines

April 13, 2018 9:46 AM

My friend in Virginia is moving to Vermont and her company wants to keep her on as an employee and allow her to telecommute. Someone has told her that in order to do that she is going to have to work through a temporary agency in Vermont in order to do this because her company doesn't have a license to do business in Vermont. ???

I've worked remotely as the only employee in a state different from my employer many times and this has never been an issue. I paid state taxes in the state where the employer was. Does anyone have any resources they could point me to so I could learn more about this subject?

posted by orsonet to Work & Money (10 answers total)

I paid state taxes in the state where the employer was.

This is highly state-dependent, but in most states, you need to pay income tax (and sometimes even local tax) in the state where you physically work. Some states have agreements set up to make cross-state commutes or telework easier, but that is the exception, not the rule.

When I moved from Texas (with no state income tax) to Pennsylvania and continued to do remote work for my Texas employer, they arranged for me to be hired by a multinational staffing firm ManpowerGroup/Experien who had a legal presence in Pennsylvania. I was a W-2 employee for Experien and they collected state taxes for me.
posted by muddgirl at 9:49 AM on April 13, 2018 [4 favorites]

I paid state taxes in the state where the employer was.

I am not a tax professional but I am pretty sure this is wrong; you should be paying taxes in the state where you performed the work.

I have had two cross-state remote jobs. Once used an outsourced HR/health insurance company whose name appeared on my paychecks; the other paid me directly. I'm not aware of a legal requirement to have a business license in each state in which you have an employee.
posted by enn at 9:51 AM on April 13, 2018 [2 favorites]

You're supposed to pay taxes wherever the work is done. Now that most companies outsource payroll to ADP or one of their competitors, there is no complexity here unless your withholding is directed to the wrong state for whatever reason.

The employer may need to register with Vermont to get an ID number so they or the payroll company can withhold taxes correctly, but that should be it. My SO has worked for companies in states where they have no physical presence and they've never had trouble doing the taxes correctly. Come to think of it, all the W2s were issued with the same federal TIN with the company payroll office's address, so it may be easier than I thought.
posted by wierdo at 9:53 AM on April 13, 2018 [3 favorites]

Response by poster: I was working as a college teacher, so I don't know if that is different. But can you ignore that part
- maybe the colleges were wrong - and just focus on whether or not my friend can go to Vermont and work for an employer in Virginia without the world having to be moved? That's my question and I can't find anything about it online. Thanks.
posted by orsonet at 9:56 AM on April 13, 2018

Best answer: As mentioned above, my sense (not a specialist here) is that the issue is that the company needs to withhold state taxes for your friend. I agree with weird above, if the employer is a large company OR they contract out their payroll processing to large company like ADP, then this should not be problem.

My advice is
1. your friend should take to HR - with luck this is not a problem
2. If HR doesn't know but they use an outside payroll processor, friend should ask HR to check with payroll folks
3. If HR doesn't know and they do payroll in house or with some small local processor, I would suggest that friend spend a little money to get an appointment with a Vermont CPA on what needs to be done to be compliant with Vermont state tax laws.

Working for a temp agency is going to cost someone money, don't go there unless your friend really needs to do it.
posted by metahawk at 10:03 AM on April 13, 2018 [3 favorites]

The employer may need to register with Vermont to get an ID number so they or the payroll company can withhold taxes correctly, but that should be it.

Yeah, pretty much any corporate entity considered to be "transacting business" in another state has to register their corporate entity in that state and apply for state tax registration, etc. which costs money (albeit not a whole lot) and takes time. It might just be that they don't want to do that for some reason and paying this employee counts as "transacting business" in a way that them working via a temp agency does not.
posted by griphus at 10:11 AM on April 13, 2018

(The regulations for colleges and other sorts of non-corporate entities transacting business across state lines are very different AFAIK.)
posted by griphus at 10:12 AM on April 13, 2018 [1 favorite]

To work remotely in a different state as a remote worker, the business should setup a business "nexus" in that state. Most HR departments/systems should be able to do this relatively easily. It doesn't require renting an office or anything, it does require registering with the state so that payroll taxes can be taken care of. Echoing what griphus + weirdo said.
posted by so fucking future at 10:13 AM on April 13, 2018 [2 favorites]

Best answer: Here's where to start on the Vermont state websites. The employer, based in another state, is considered a "foreign corporation" in this case. Having an employee working in Vermont would qualify as "doing business" in Vermont. So they need to register as a foreign corporation. They will also need Vermont employer tax accounts with the Department of Labor and the Tax Department. Chances are their payroll vendor, like ADT, can take care of that.
posted by beagle at 11:18 AM on April 13, 2018

Go to the Vermont website, Dept of Labor. If the answer isn't there, call them on Monday.
posted by theora55 at 3:14 PM on April 13, 2018