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New Jersey Provides More Precision on Teleworking Tax Rules

May 8, 2020, 5:50 PM

New Jersey has offered more details on teleworking tax rules, while Oregon will hold a teleconference to discuss implementation of a new tax. The IRS, meanwhile, gave an update on the federal government’s emergency stimulus payouts. Here’s the latest on shifting state tax guidelines, deadlines, and policy to deal with the coronavirus pandemic. For Thursday’s coverage click here. Here’s a state-by-state roadmap.

New Jersey has issued additional guidance addressing the question of whether emergency teleworking arrangements will trigger tax obligations for employers.

The guidance, published May 6 as a frequently asked questions document, deals with teleworking concerns relating to New Jersey’s sales, personal income and employer withholding taxes during the pandemic. It builds on previous guidance temporarily waiving the state’s nexus standards—the physical and economic conditions which must be met for a business to have presence for tax purposes—for out-of-state businesses directing employees to work from their homes in New Jersey during the crisis.

The state Division of Taxation said it has waived the physical presence nexus standard for sales tax purposes, noting that no tax collection and remittance duties are triggered so long as the seller had no “physical presence other than employees working from home in New Jersey.”

The division emphasized, however, that it has not waived the economic nexus standard established following the Supreme Court’s 2018 South Dakota v. Wayfair ruling, which tossed a previous physical presence standard and acknowledged remote sellers could have tax duties based on economic presence. Under New Jersey law, remote retailers trigger nexus if they have gross revenue from sales exceeding $100,000 or process more than 200 separate transactions during a tax year.

For withholding tax purposes during the pandemic, the division said, “wage income will continue to be sourced as determined by the employer in accordance with the employer’s jurisdiction.” It directed employers to a reciprocal personal income agreement with Pennsylvania eliminating wage sourcing issues for employees and noted the two states will “not tax the wages of a resident of the other state.”

Gov. Phil Murphy (D) and the Legislature are still working out final details of a proposed extension of the filing and payment deadlines to July 15 for 2019 personal income taxes, it said, adding that an update should soon be available.

Oregon Airs Corporate Revenue Tax

Oregon businesses grappling with a new gross receipts tax will have an opportunity to weigh in on how that tax is implemented at a public hearing May 26 via conference call.

The Corporate Activity Tax—or CAT for short—is imposed at a rate of 0.57% on total revenue in excess of $1 million a company makes from transactions and activity in Oregon after a 35% subtraction for certain business expenses.

It passed in 2019 to fund schools. To the consternation of many businesses, the first estimated quarterly payments were due April 30 despite the pandemic.

Some business groups, citing the pandemic, have been urging Gov. Kate Brown (D) to delay its implementation. Brown has declined to do so, citing the importance of the revenue to the education budget. She has, however, ordered the Department of Revenue to allow businesses that owe less than $10,000 in annual tax liability to forgo making estimated quarterly payments in 2020. The quarterly payment threshold had been $5,000.

The public hearing to set permanent rules will be held from 9 to 11 a.m. Pacific time. Details are available on the Department of Revenue website.

California Taxpayers Get $22.5 Billion in Federal Relief

The Internal Revenue Service said Friday that more than 13 million Californians received a combined $22.5 billion in economic impact payments, as about 130 million Americans got checks totaling $200 billion under the new federal coronavirus relief program.

California was the largest recipient of funds from the federal program, not surprisingly, as it has the largest population among states. Taxpayers in Texas, second on the list, received a total of $18.8 billion, while third-place Florida received $15.1 billion. New York was fourth, at $12.5 billion.

More than 150 million payments are to be sent out under the latest virus relief law, known as the Cares Act (Public Law 116-136). Eligible individuals may receive up to $1,200 for individuals and $2,400 for married filing jointly, depending on income, plus an additional $500 per qualifying child.

Go to irs.gov for the latest information, FAQs and payment updates.

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To contact the reporters on this story: Michael J. Bologna in Chicago at mbologna@bloomberglaw.com; Paul Shukovsky in Seattle at pshukovsky@bloomberglaw.com

To contact the editors responsible for this story: Jeff Harrington at jharrington@bloombergtax.com; David Jolly at djolly@bloombergtax.com

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