2024 State Election Results Dashboard
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Key Takeaways:

  • Many government relations professionals travel regularly for work — lobbying in statehouses, attending conferences, or visiting colleagues to collaborate in person. But few people realize that when you cross state lines for work, it can have major tax implications for both the employee and the employer.
  • States require employers to track their employees’ locations and withhold income taxes accordingly. But states impose a patchwork of withholding requirements — some dependent on the number of days an employee is in a state, and some require complex calculations of wages earned in-state. Nearly half of the states require employers to withhold on the first day an employee works within the state or require an individual to file after the first day.
  •  Over the last few years, lawmakers in several states have enacted legislation to reduce the burden on mobile workers and their employers.
  • The recently relaunched Mobile Workforce Coalition is working to pass uniformity legislation in key states and the U.S. Congress.

Many government relations professionals travel regularly for work — lobbying in statehouses, attending conferences, or visiting colleagues to collaborate in person. But few people realize that when you cross state lines for work, it can have major tax implications for both the employee and the employer. For example, if you attend a one-day conference in Boston, your employer is on the hook to withhold income taxes for Massachusetts, even though you’re not a Massachusetts resident. If you visit New York for a single day for work, you are required to file a New York tax return. It’s a compliance nightmare both for traveling employees and their employers, who are required to track employees’ locations and withhold income taxes according to a patchwork of state laws.

This issue has evolved from a niche tax challenge to one with wide-ranging impacts for workers and the business community at large. As businesses across the country adapt their post-pandemic operations, many companies are choosing to move to hybrid or fully remote models, allowing employees to work in a location of their choice and travel to the office only periodically. Recent data suggests that the average office occupancy rate is barely 50%. Many workers are embracing this newly-flexible environment by traveling across state borders while working remotely.

Businesses that employ hybrid or remote workers often require employees to visit an office outside their state of residence periodically. These employers have a strong incentive to support laws that reduce the tax administrative burden for their mobile and temporary workers. In addition to those remote or hybrid workers that must travel periodically to headquarters, what about employees who cover sales regions and must travel to several states to visit factories or other facilities? Or professions that require routine travel to conferences and events across the country? All of these activities likely trigger personal income tax liability in states in which the employee does not live, even though they are only in that state for a few short days. And this patchwork of laws is a significant compliance burden for employers, especially for small and medium-sized businesses that don’t have robust tax or HR departments.

States require employers to track their employees’ locations and withhold income taxes accordingly. But states impose a patchwork of withholding requirements — some dependent on the number of days an employee is in a state, and some require complex calculations of wages earned in-state. Nearly half of the states require employers to withhold on the first day an employee works within the state or require an individual to file after the first day. In others, the threshold is only a few thousand dollars. It is easy to see how quickly a periodic business traveler or digital nomad can trigger personal income-tax liability in multiple states in a single year.

State policymakers are interested in solving this issue, and it presents a unique opportunity for state lawmakers and the business community to collaborate on a policy solution. Over the last few years, lawmakers in several states have enacted legislation to reduce the burden on mobile workers and their employers. In 2019, Illinois enacted legislation imposing a 30-day threshold. In 2021, both Louisiana and West Virginia enacted similar bills, imposing 25-day and 30-day thresholds, respectively. In 2022, Utah imposed a 20-day threshold. This year, several states are considering similar bills, including Kansas, Minnesota, Montana, and Nebraska. Similarly, federal legislation has been introduced in nearly every Congress since 2011, and if enacted, would impose a national 30-day withholding standard. The issue has always received broad, bipartisan support in Congress, passing the House several times on a voice vote (in 2012, 2015, and 2017). As we look to 2024, we expect to see more bills like this emerge as the issue gains even more prominence within the public and private sectors alike. 

The recently relaunched Mobile Workforce Coalition is working to pass uniformity legislation in key states and the U.S. Congress. If your business or organization would like to join the relaunched Mobile Workforce Coalition, please reply to this email or contact Liz Malm directly.