nexus question


M

Matt

I am currently employed by an Internet company that sells item on the
web. They are based in Washington, and I work in Michigan. However, I
am looking to move to Ohio soon with my fiance, and have approached my
company about working remotely from home there. My company is concerned
about having to pay taxes for Ohio since they will have
me located there (nexus) ... they do not want to do it.

Is there any way that they can continue to employ me in Ohio, and not
have to pay the Ohio taxes? Can they hire me on as a consultant
instead, or can I say I'm based out of Michigan still and work out of
Ohio?

Any help would be greatly appreciated!!

thank you.

-Matt
 
Ad

Advertisements

J

John R. Jorgensen

Hello, Matt.

Let me first preface my statement by saying that I am not yet a CPA,
though I do have experience as a tax accountant in the state of New
Mexico.

I took a quick look at the tax code for the state of Ohio and found
the following statements:

"Every employer maintaining an office or transacting business within
the State of Ohio and making payments of any compensation to an
employee, whether a resident or nonresident, must withhold Ohio income
tax."

"Every individual who performs services subject to either the control
and/or will of an employer, whether as to what shall be done and/or
how it shall be done, is an employee for the purposes of Ohio income
tax. It does not matter that the employer permits the employee
considerable discretion and freedom of action, so long as the employer
has the legal right to control either the method and/or result of the
services."

Based on this, I believe that the Ohio Department of Taxation would
take the position that, even if you work from home, you are an
employee of the Internet company. Even though you would be working
from home, you would still be working IN the state of Ohio.

A lot of companies have employees that are "independent consultants"
but who really fit the definition of an employee. That is why state
tax codes usually qualify the term "employee." Unless you have
multiple clients and can demonstrate that you, in fact, do not work at
the will and discretion of the Internet company in question, I don't
think that idea will work either. Certainly, I would not advise
someone to take such a tenuous position.

Again, I want to say that I am not yet a CPA and I would advise you to
consult with a CPA in the state of Ohio who specializes in tax. Good
luck to you!


John R. Jorgensen
BBA Accounting
 
R

R

From your post, you didn't explicitly state what type of taxes your
employer wants to avoid. Is it state payroll taxes, or is it sales
tax (since being in Ohio would indeed create a nexus issue for them.)
If it is strictly payroll taxes, then you should do your own reseach
to find out the difference between the two states and see if you can't
either refute their worries or create a compromise to offer.

As far as contractor versus employee, the state laws may vary from
federal, but you can check the IRS guidelines at www.irs.gov.

As far as working in Ohio and "claiming" to be in Michigan, that would
be a bad idea. If you offer that idea to your company, if they are
not, they should be offended by the suggestion of duplicity. If they
have ethical standards, they might interpret that if your willing to
"fudge" on tax reporting, you might also be willing to "fudge" when
reporting to them!

Goo luck,
Russell Tuncap, CMA, CPA
www.tuncap.com
 
B

Barnabas Collins

I am currently employed by an Internet company that sells item on the
web. They are based in Washington, and I work in Michigan. However, I
am looking to move to Ohio soon with my fiance, and have approached my
company about working remotely from home there. My company is concerned
about having to pay taxes for Ohio since they will have
me located there (nexus) ... they do not want to do it.
Probably no choice. They would be legally required to do it.

They'd have to do it in Michigan too.

The only alternative is to comply with the strict limitations for
a self employed.
 
B

Barnabas Collins

A lot of companies have employees that are "independent consultants"
but who really fit the definition of an employee. That is why state
tax codes usually qualify the term "employee." Unless you have
multiple clients and can demonstrate that you, in fact, do not work at
the will and discretion of the Internet company in question, I don't
think that idea will work either. Certainly, I would not advise
someone to take such a tenuous position.
Take a good hard look at what constitutes an employee and what
constitutes a consultant. You can bet the state will look at very
closeley and probably enter the situation already convinced the person
is an employee.
 
Ad

Advertisements

B

Barnabas Collins

From your post, you didn't explicitly state what type of taxes your
employer wants to avoid. Is it state payroll taxes, or is it sales
tax (since being in Ohio would indeed create a nexus issue for them.)
If it is strictly payroll taxes, then you should do your own reseach
to find out the difference between the two states and see if you can't
either refute their worries or create a compromise to offer.
Be forewarned though sales tax may be inevtible. IMHO we are this
clsoe to having a "sales tax" that all states will have to charge
on internet transactions.

I would also point we are very close to that anyways, when you buy
something on the internet from out of state you are in a number
of states required to pay "use tax."

So we are already 90% of the way towards a national sales tax.
 
Ad

Advertisements


Ask a Question

Want to reply to this thread or ask your own question?

You'll need to choose a username for the site, which only take a couple of moments. After that, you can post your question and our members will help you out.

Ask a Question

Top