- quote -

Well, this was one of the real biggies. I would think it
would have been worthwhile for any state to go after them.
<G
- quote -

Hours to days but never more than a week. Not even close to
the compensation being in the millions! <VBG
- quote -

From 1990 to 2000. I'm sure with the multinatioanl merger
they are going through at this time, all of this
"non-compliance" would come out.

Carol
It's a cats world. I'm just here to open the cans.

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clj1219[at]aol.com2922spam (CLJ1219) wrote:

- quote -

Oh, yes, he did. They just didn't do it <G> .

Many large organizations are still not in compliance with
the states. The states tend to go after the big ones, as you
can imagine they would. If your husband spent only a few
days in each state, and his compensation was not in the
millions, it might not be worth the states' time and
resources to pursue either him or the employer. That
doesn't mean he wasn't subject to their taxes, though.

The major accounting and law firms didn't have a clue about
this until they were threatened with criminal prosecution in
the late 1980s. I don't know how long ago your husband
worked for the company you describe, but if it was a while
back, I wouldn't be too surprised if the employer is in
compliance now.

Katie in San Diego
The foregoing is intended for educational purposes only and
does not constitute legal or professional advice.

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- quote -

Katie,

My comment was more about companies who send employees into
other states to do on-site work for clients on a regular
basis, but short-term.

My husband did service work for 10 years for a very large
corporation, sometimes going out of the country and almost
always out of state. Never did he have to have taxes
withheld in any of those states.

Carol
It's a cats world. I'm just here to open the cans.

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Harlan Lunsford <hlunsford[at]bellsouth.net> wrote:
- quote -

But the rules for sales tax are exactly the same. In fact,
courts in several states have held that the presence of
employees (not residents) in the state for as little as 12
visits over a 3-year period is enough to create nexus for
use tax collection purposes. See
_In the Matter of Orvis Company_, Inc. 654 NE2d 954, NY Ct App 1995;
_In the Matter of Vermont Information Processing Inc._, 86 NY2d 165,
NY Ct App 1995, cert. denied 116 S.Ct. 518, 1995.

ANY significant presence of employees performing services
for the employer in a state, whether they reside there or
not, creates due process/commerce clause nexus for the
employer and the employee. The employer may be protected
from taxes on or measured by net income by P.L. 86-272, but
the employer is still subject to all other state and local
taxes, including use tax collection and employer taxes, and
the employee is subject to individual income tax.

- quote -

A state could take that position, and some do, at least for
some purposes. In California, for example, a foreign
corporation that is qualified to do business in the state is
required to file an annual corporate franchise tax return
and pay the $800 minimum tax, but is not subject to the
measured tax unless it has activities exceeding the
boundaries of P.L. 86-272.

For use tax collection purposes, registration as a foreign
corporation may create nexus, since the corporation has
essentially marched in and volunteered. (I doubt that any
court, post-Quill, would find that the presence of an agent
for service of process would create a physical presence for
commerce clause purposes; I think it would be only a
"slightest presence." But it is a voluntary act that
arguably gives the state taxing jurisdiction regardless of
other factors.) However, many states do not require use tax
collection by a corporation whose only connection with the
state is registration as a foreign corporation, e.g., Wis.
Admin. Code Tax 11.97(4), and most states don't list
qualification to do business as a nexus-creating activity
for use tax collection. A few states do, though. The
Michigan Secretary of State will not issue a certificate of
authority to do business to a seller of tangible personal
property unless it is accompanied by an application for a
seller's permit (Mich. Comp. Laws Ann. § 205.95(2)).
Alabama lists qualification as a nexus-creating activity for
use tax collection ( Ala. Code § 40-23-68(b)(2)).

But your client is not taxable in Georgia because it is
registered there. It is taxable because it is doing
business in the state.

Katie in San Diego
The foregoing is intended for educational purposes only and
does not constitute legal or professional advice.

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- quote -

Well, such companies are multistate businesses and are
subject to multistate taxes. For small businesses (sending
employees into only a handful of states) it's not all that
big a deal. Big ones can handle it.

Such companies also need to consider whether they should be
registered or qualified to do business in states where their
employees perform services. Registration is a corporate law
issue rather than a tax issue, having to do with the ability
to defend oneself in the state's courts. However, it
usually does create some reporting requirements even if the
company does no business in the state during a particular
year.

The key word here is "regularly." A company that sends one
employee into another state for a short period of time has
nothing to worry about. The tax effect would not justify
the state's effort even to process returns, let alone pursue
the company or the employee.


- quote -

LOL, me too.

Katie in San Diego
The foregoing is intended for educational purposes only and
does not constitute legal or professional advice.

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Katie Jaques wrote:
- quote -

Okay ! you got me there, Katie. I was thinking solely
in terms of sales tax.

- quote -

Registering as a foreign corporation creates nexus by virtue of
having to have a registered agent residing in that state.

ChEAr$,
Harlan Lunsford, EA n LA
Mon, 29 Nov 2004 15:46:30

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- quote -

This could be a horrific nightmare for companies who
regularly send employees into other states to do service
work.

Carol
It's a cats world. I'm just here to open the cans.

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Harlan Lunsford <hlunsford[at]bellsouth.net> wrote:
- quote -

Yes it does, Harlan. See my other response above.

In fact, a company that has employees working on the
premises of a client in another state is doing business in
that state and is subject not only to personal income tax
withholding (and unemployment insurance taxes) for its
employees, but also to other taxes at the company level,
including income taxes unless its activities are protected
by P.L. 86-272.

Katie

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Harlan Lunsford <hlunsford[at]bellsouth.net> wrote:
- quote -

Not true, Harlan. Having employees performing services in
the state creates a physical presence for the employer,
regardless of whether the employer maintains a place of
business in the state. Employees working at a customer's
location create nexus for the employer.

If the activities of the employees are limited to
solicitation of sales of tangible personal property that are
sent outside the state for approval and shipped from outside
the state, and the employees work strictly out of their
homes and not from any premises attributable to the
employer, and the employer has no property (e.g. inventory)
in the state, then Public Law 86-272 exempts the employer
from taxes on or measured by net income. However, such a
company is subject to other state and local taxes, such as
employment taxes, franchise taxes based on capital stock or
net worth, use tax collection responsibility, etc.

- quote -

Generally speaking, merely registering to do business in a
state does not create nexus for tax purposes, although it
usually does result in some reporting requirements. Of
course, since your client performs its work in Georgia, it
has nexus there regardless of its registration status. If a
company is doing business in a state, it has nexus there,
whether it is registered or not.

Katie in San Diego

The foregoing is intended for educational purposes only and
does not constitute legal or professional advice.

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"Harlan Lunsford" <hlunsford[at]bellsouth.net> wrote:
- quote -

Well great minds....

- quote -

There's a difference between an employee living in a state
and working in a state. The employee will be taxed where he
lives and where he works. The corporation will only be
taxed where it does business. To that end, a state can only
force withholdings if a corporation does business in that
state. If an employee for a company works in a state other
than his state of residence, the state of residence has no
jurisdiction to withhold on the employees wages if the
company does no business there.

--
David M. Woods, EA, ChFC, CLU
Woods Financial Services
Norwood, MA 02062
www.woods-financial.com

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Mike Lewis wrote:

- quote -

One further note. A number of replies, mine and Dave Woods
excepted, seem to confuse state taxability of income with a
state's requirement to WITHHOLD tax on income (since it's
naturally taxable to that state).

I still say there must be a nexus between the out of state
corporation and the "foreign" state. Merely having it's
employees on premises of a client corporation in another
state doesn't necessarily fill the bill.

ChEAr$,
Harlan Lunsford, EA n LA
Wed, 24 Nov 2004 16:08:56

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- quote -

Harlan,

Just be sure to batten down the hatches on the west side of
the river. <G> We have had almost 8 inches of rain since
Saturday, and it is raining now. The forecast is for rain
at least through the rest of today. I hope you're on high
ground down there.

Have a Happy Thanksgiving.

Carol
It's a cats world. I'm just here to open the cans.

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- quote -

That was why we were relieved when we didn't hire the guy
from North Carolina a couple of years ago. We were going
to, as soon as the work was enough to substantiate another
employee. After I saw the application fee, we decided not
to apply until he was actually hired. Looking back, we're
glad.

Carol
It's a cats world. I'm just here to open the cans.

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Paul A Thomas" <taxman[at]negia.net> wrote:
- quote -

I agree with your NC analysis except for the fees. NC
doesn't charge $50 for a NC W/H # and another $50 for a
sales tax number. See the AS/AP1 for details:

http://www.dor.state.nc.us/downloads/wh_forms.html

A few years ago NC did charge a fee for the sales tax number
but it was about $20 not $50.

--
Drew Edmundson

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"Mike Lewis" <jmpj[at]cableone.net> wrote:

- quote -

Yes.

States have the power to tax all income of residents, from
all sources. They also have the power to tax income of
nonresidents from sources within the state. The source of
income from the performance of personal services is the
place where the services are performed. Therefore, if you
perform services for your employer in Oklahoma, you have
Oklahoma source income. Your employer should withhold OK
tax, and you need to file a nonresident return to report the
income and pay any additional tax due or claim a refund if
you are overwithheld.

Some states have a de minimis rule for this kind of thing,
based on a number of days or an amount of source income
below which no withholding or filing of a return is
required. Others theoretically require reporting for any
amount of source income, although as a practical matter
small amounts of time and/or money are likely to go
unnoticed.

One of the major national accounting firms got into a lot of
trouble with the state of Colorado back in the late 1980's.
The firm's consulting practice had sent a number of
well-paid professionals into the state to perform fairly
long-term contracts and had not withheld Colorado income tax
from their salaries. There was talk of criminal
prosecution. That got the attention of the accounting
firms, and I think it is universal now, with all of the
national firms and presumably the regional ones as well,
that all employees must report on their time sheets where
they worked every day.

Your client is doing business in every state where it is
sending employees to work, and since the contracts are for
fairly extended periods of time, it is unlikely that it
would qualify for any de minimis rule. The client itself is
a taxpayer in each of those states, and also must register
as an employer and withhold individual income taxes from the
salaries of employees who are working there.

Katie in San Diego

The foregoing is intended for educational purposes only and
does not constitute legal or professional advice.

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"Mike Lewis" <jmpj[at]cableone.net> wrote:

- quote -

I would say your examples indicate nexus, therefore the
employer should be withholding tax to the source state.

--
David M. Woods, EA, ChFC, CLU
Woods Financial Services
Norwood, MA 02062
www.woods-financial.com

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Mike Lewis wrote:

- quote -

the way I've always understood it, is that if a company has
a nexus in the state, then it's subject to withholding,
sales taxes, etc etc.

If the case is that while there, those employees worked in
the corporate clien'ts existing offices, OR if while there
the corporation temporarily rented space for them to use,
that creates a nexus.

But one would think that if these programmers work on the
premises of a customer, then there would be no nexus.

Nexus can also be created by a corporation registering as a
foreign corporation in another state. Example is one of
my coporate framing contrators who although charterd in
Alabama is registered as a foreign corporation in Georgia
and acutally performs all work over there. "We" withhold
Georgia taxes on all employees EXCEPT the president and head
honcho. After all, somebody has to hold down the fort on
west side of the river.

ChEAr$,
Harlan Lunsford, EA n LA
Tue, 23 Nov 2004 17:37:15

space

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- quote -

Yes!!! State law prevails!!! I don't know of any state
which would not tax the income of people who work in those
states even though the work may be for temporary periods of
time. Local taxes may be an issue as well.

"Jack" - John H. Fisher - TaxService[at]aol.com
Philadelphia, Pa - Atlantic City, NJ - West Wildwood, NJ
My Newsgroups & Boards at: http://members.aol.com/TaxService/index.html

Where Ignorance is bliss, 'tis folly to be wise!=

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"Mike Lewis" <jmpj[at]cableone.net> wrote

- quote -

You can argue all you like, the state will win this one.

- quote -

It's possible. I would suspect that most states have some
diminimus exception, but don't look for it in North
Carolina, that made my client withhold on not-more-then two
days pay of an employee (the withholding application fee is
$50 by the way) that was doing an installation of some
equipment sold. They also had to file for a sales tax
number (although all their sales are exempt government
sales) for another $50 application fee.

All in all, they got about $105 from the client. ($5 in
state withholding on the wages)

--
Paul A. Thomas, CPA
Athens, Georgia
taxman at negia.net

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We have a corporate client domiciled in TX who sends
computer programers to various states for 3-6 month
assignments. One specific state, as an example, is Nebraska.
When talking to the Nebraska revenue department, they advise
that anyone who works in their state must have state income
tax deducted and filed/paid to them quarterly. Is this a
generally common (and correct) position or are there
arguments to avoid the hassle. Under this logic, if I am
sent to Oklahoma for a week to set up a new client's
accounting system, my employer has to withhold OK tax?

Mike Lewis, CPA

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