Newburg Update for 4/22/2020 – TIR 20-5: MA Tax Implications of an Employee Working Remotely due to COVID-19 Pandemic

Massachusetts has issued a technical information release on tax implications for different aspects of employees working from home. The rules being adopted are for the time period beginning March 10th until the Governor gives notice that the state of emergency is no longer in effect. Here is a brief summary.

Personal Income and Withholding Tax

Compensation received by a non-resident who prior to COVID, was an employee in Massachusetts, and is now performing such services from a location outside Massachusetts due to COVID will continue to be treated as Massachusetts source income subject to personal income tax. Other states have adopted similar sourcing rules.  Employees are still eligible for credit for taxes paid in other states if they are not working remotely in Massachusetts but incur tax liability in another state.

Sales and Use Tax nexus/Corporate Excise

The presence of 1 or more employees that worked in another state before COIVID that are now working remotely in Massachusetts will not on its own trigger nexus for sales and use tax collection.

Also, the presence of 1 or more employees working remotely in Massachusetts due to COVID will not be sufficient to create corporate nexus.

Services performed by an employee working remotely in Massachusetts will not be considered when determining an employer’s payroll factor for apportionment purposes.

Paid Family and Medical Leave

An individual who previously was not subject to PFML rules will not become subject to these rules because the individual is temporarily working from home in Massachusetts. The opposite is true as well, if you were subject to PFML but are now temporarily working from home outside of Massachusetts, you continue to be subject to PFML rules.

Massachusetts Pandemic Unemployment Assistance