Cross-State Tax Complexity: Prepare for the Fiscal 2020/21 New Normal

With the pandemic causing financial hardships to businesses and individuals, states have implemented a variety of tax relief measures. These measures impact employment nexus, employer withholding obligations, and in some cases have deferred taxation to protect companies and their struggling state economies. However, because of the record levels of state revenues shortfall (see figure), companies are very likely to see unprecedented levels of scrutiny, disclosure requests, and increased audits in the coming years. 

The implementation of state-to-state data sharing, advanced analytical, and automated audit capabilities are also very likely to materialize in early 2021. This is particularly important as employers have begun to give employees the flexibility to work fully remotely.

“81% of tech workers living within 30 miles of the country’s biggest tech hubs […] are considering or have already made plans to move to a more affordable city since the onset of COVID-19”. Source: Tech Domains Survey, September 2020

Employees working from home in HQ-adjacent counties or out of state has become the norm. This presents a daunting challenge for companies in terms of implementing up-to-date payroll withholdings. It can also rapidly overwhelm a variety of organizations (HR, Finance, Tax, Risk) that do not have the mandate, dedicated staff, nor the expertise to tackle these increasingly complex and labor-intensive tasks. Companies may also not be willing or able to resort to costly outsourcing services or bear the potential cost of audits and non-compliance penalties.

“80% [of companies] anticipate adopting remote work as the new norm. The majority of companies are already set up or are in the process of enabling domestic and international remote working arrangements.  Source: PwC Global Survey, September 2020

Topia Can Help You Get Ahead of These challenges

When employees can work remotely they can work from anywhere – a different town, state, or even country. This creates new compliance obligations organizations haven’t traditionally dealt with in the way of multi-jurisdiction withholdings and permanent establishment risk. To cope with the challenges of a fully remote and mobile workforce, organizations need to adopt technology developed for managing distributed workforces.

Topia Compass is the leading technology solution for tax and payroll compliance due to business travel and today’s distributed workforces. It helps automatically identify where your employees are working, automates the risk assessment and withholding calculations based on configurable  tax and policy logic, and allows your team to take immediate action where and when needed (withholdings, mitigate risk, etc.) 

Topia Compass enables coordination across key organizational functions (HR, Payroll, Finance, Tax, and Risk departments) and automates the various reporting, workflows, payroll instructions, and approvals processes for accurate and up-to-date multi-jurisdiction and state tax withholdings. 

Learn more about Topia’s complete distributed workforce solution(s), including for pre-trip readiness (immigration, A1 filling, posted workers), permanent establishment, as well as international tax withholding. 

Additional resources at your disposal 

• CNBC, The app financial traders are using to avoid a New York City tax during the coronavirus pandemic
• ReLocate Magazine, Compliance Risks in a Post-Covid World
• HR Grapevine, Do you need employee location tracking? Compliance considerations for your newly distributed workforce