Expanding your multistate footprint with business or remote employees in a new state can be exciting in the growth of your business, but these events also trigger business activity and subsequent tax responsibilities. It’s best not to learn this the hard way. Are you considering doing new business in another state or hiring remote workers? REDW’s trusted State and Local Tax advisors are here to help you analyze your situation to ensure you make the most of tax opportunities as you adhere to all state and local requirements.
Are you considering doing business in another state?
Businesses expand in several ways:
- Acquiring a related business
- If you’ve got plant capacity, expanding into a new sales territory
- Open a brand new location
Each of these scenarios represent opportunities to grow your revenue—and your own net worth. When crossing state lines—or even counties or municipalities—there’s a great deal to consider when it comes to compliance.
What You Need to Know on Sales, Income and Property Taxes
When selling products and services, how things are taxed in one location is nearly guaranteed to be completely different than how it is done in another. Sales tax rates and their filing and payment due dates vary widely from one another and often depend on the type of product or service sold. As you plan expansions, ensure that you accommodate for these tax nuances as well as registering as a seller, noting exemptions, and sales tax holidays.
Personal and corporate income tax should also be considered and prepared for. If you’ll be moving any of your executives, consider the impact the move will have on their wallets—and well as that of the business. You may have considered whether a cost-of-living (COL) adjustment is warranted, but also take into account whether the income tax rate—or lack of one—may be offset by hefty property taxes.
Explore Your Options as a Multistate Business
Communities often seek to attract new business investments. The cities, corridors and neighborhoods benefit from higher employment, attract other businesses, and through direct investment into the local economy. In exchange, you may find funds or opportunities set aside to attract your business. Learn about these options—they can come in the form of grants to train new employees, property tax exemptions, or by supplying you with needed infrastructure to connect to public utilities. Each can contribute significantly to your bottom line.
While Amazon, Google, and Ikea often grab the headlines for receiving these types of ‘deals’, in reality, cities know that 99.9% of businesses are classified as small businesses—those with fewer than 500 employees—and they may be available to you as well.
If you’re exploring becoming a multistate business or expanding as one, talk with officials at each new state’s corporation commission, small business administration office, or with city representatives, to find out about funds or other advantages available to you. If you’re eligible to receive benefits, speak with a trusted state and local tax professional to understand if there are any tax implications attached.
Where Are Your Remote Employees?
While there have always been state and city regulations regarding taxes for remote workers, the upsurge in employing team members in other states has required business leaders to quickly learn about their tax obligations. The increase in remote workers also encouraged states to adjust their taxation rules.
Today, labor shortages in several industries have compelled employers to find workers wherever they live. Even New York City has acknowledged the challenge of its own workers being able to afford living in the city and has begun a pilot program permitting public servants to be eligible to work two days remotely as an effort to increase employee retention.
Shifting to remote work has been significantly aided by technological advancements. The odds of you employing staff that works remotely is great— 35% of workers that can work from home do so on a full-time basis.
For businesses, this is a reminder that if you have or may have team members that work remotely, you may have state and local tax obligations in the states where the worker resides.
State unemployment taxes and overtime labor laws are a few of the challenges businesses face. California’s 8-hour workdays aren’t intuitive to follow by those who have traditionally considered overtime to occur after a 40-hour workweek rather than an 8-hour day. If you don’t know an employee is working from California, it doesn’t release you from the responsibility of following the state’s laws.
Health emergencies, missed ballgames, or sunny beaches may be the impetus that sparks a team member to move. While an employee may not think it matters where they work from if they work remotely, employers are obligated to pay the correct tax authority and follow the resident’s state labor laws. If you haven’t asked your remote employees where they are working from, the sooner you do so, the faster you can ensure you are within compliance.
REDW Is Here to Help Multistate Business Leaders Cross State Lines Successfully
Adapting to a changing workforce and seeking out new business opportunities should never be discouraged. REDW’s trusted state and local tax advisors are standing by to come alongside your business for every state where you do business and those your employees work from. We’ll identify challenges you will encounter and help you ensure compliance and sustained, successful growth. Contact us today to make crossing borders an exciting task with less surprises.
