Multistate: More States Respond to COVID-19 and the CARES Act

This past week, the California Franchise Tax Board posted a FAQ addressing whether the presence of an employee working from home in California will create nexus for an employer that previously had no connection to California. In its response, the FTB confirmed that California will not treat an out-of-state corporation whose only connection to California is the presence of an employee who is currently teleworking in California due the stay at home order as being actively engaged in a transaction for the purposes of financial or pecuniary gain or profit. Also, California will not include the compensation attributable to an employee who is currently teleworking in the minimum payroll threshold set forth in California’s factor presence nexus threshold. California will treat the presence of an employee who is currently teleworking in California due to the stay at home order as engaging in de minimis activities for purposes of P.L. 86-272 protection.

In similar news, the Rhode Island Division of Taxation extended until November 18, 2020 an emergency regulation (280-RICR-20-55-14) providing that the income of nonresident individuals who are employed by a Rhode Island employer and are temporarily working outside of Rhode Island solely due to COVID-19 will continue to be treated as Rhode Island-source income for withholding tax purposes. Likewise, Rhode Island will not require employers located outside of the state to withhold Rhode Island income taxes from the wages of employees who are Rhode Island residents temporarily working within Rhode Island solely due to the pandemic.

In indirect tax news, Massachusetts Governor Charlie Baker and other Legislative leaders announced an extension of administrative tax relief for certain businesses, notably those in the hospitality industry. This relief includes extending the deferral of regular sales tax, meals tax, and room occupancy taxes for small businesses due from March 2020 through April 2021. The due date for these taxes will be extended to May 2021.  The relief provisions apply to vendors and accommodations providers whose cumulative liability in the 12-month period ending February 29, 2020 was less than $150,000.  During the extension period, no penalties or interest will accrue. The Department of Revenue has issued emergency regulations to implement the relief measures. Please stay tuned to TWIST for future updates.