The Mobile Workforce State Income Tax Simplification Act of 2013 (the “Workforce Simplification Act”) was introduced in the House of Representatives on March 13, 2013. The Workforce Simplification Act would limit a state’s ability to tax a worker’s wages unless the employee was present and performed duties in that state for more than 30 days during a calendar year.
For an employer to determine whether withholding would be applicable to an employee, the following would apply:
- The employer may rely on an annual determination made by its employee of the time expected to be spent in various states unless the employer has actual knowledge to the contrary or the employer and employee collude to evade tax.
- Employer records of an employee’s location maintained in the ordinary course of business would not negate an employer’s ability to rely on the employee’s annual determination described in the first bullet point unless the employer maintains a system that tracks where the employee performs work on a daily basis (in such case, the employer must rely on that system’s data).
In instances where employees work in more than one state on a given day, wherever the employee performs the most duties in one day is the state that receives credit for that employee’s work day. However, an employee’s locale while in transit would not be considered in determining the location of an employee’s duties. Also, if an employee works both within his or her state of residence and in one other state, that employee’s duties for the day will be deemed to be performed in the nonresident state.
Professional athletes, professional entertainers and certain public figures are excluded from the definition of “employee” for purposes of the Workforce Simplification Act.
At this time, it is unclear whether the Workforce Simplification Act will become law. However, it is clear that states are placing increased emphasis on the determination of where an employee is working in order to ascertain if withholding should take place.