If I employ someone remotely in a new state, do I need to complete tax registrations for that state?
See below for which type of workers require employer tax registrations.
When employing someone remotely in a new state for the first time, you may need to complete that state's employer tax registrations. However, it depends on the type of worker.
If you hire one of the following types of workers remotely in a new state, you'll generally need to complete that state's employer tax registrations:
- Full-Time W-2 Employee
- Part-Time W-2 Employee
- Paid Interns
Tax registrations generally include withholding (for most states) and unemployment insurance, but some states may also require additional payroll-related registrations, such as Paid Family Leave programs. Some states may have a combined registration for withholding and unemployment.
The following types of workers generally do not require you to complete employer tax registrations in a new state:
- Unpaid Interns
- Independent Contractors (1099s)
However, it is still important to check with the state to be sure. For instance, in some cases, an independent contractor's activities may create a physical presence (business nexus) in the state, which could trigger certain tax or registration obligations.
Some common responsibilities that can create nexus, regardless of worker classification, include:
- Soliciting sales or taking orders
- Delivering products
- Installing or servicing equipment
- Providing training or support to customers
- Maintaining inventory
- Collecting payments