Our multi-state tax experts have the experience to help companies or digital nomad entrepreneurs navigate their state tax issues. We can help you analyze your tax responsibilities and help you with planning and reporting.
The COVID-19 pandemic has catapulted the gig-economy (a labor workforce prevalently consisting of short-term contract or freelance workers), and mobile workers, because some Americans were forced to work from home. This created a new way of how workers performed their daily responsibilities with their employers. Many states have now enacted laws that would require businesses to comply with all mobile employment related tax responsibilities, in addition to their state income/franchise tax liabilities for doing business in a state.
Tax Changes for Digital Nomads
States enacted mobile or freelance worker withholding requirements after the sudden change in employee work behavior. This creates a compliance headache for businesses that hire remote and mobile workers. States have recently codified their definition of what determines substantial nexus connection from business activity in their state. And they define substantial connection by revenue over physical presence, meaning any activity connected to the revenue generated for the benefit of the company subjects that business to all state tax liability and reporting requirements. So even employees working in the state on a temporary basis could expose a business to tax liability. Out-of-state businesses would also be required to register and withhold employment taxes for workers doing business in a state on a short-term basis.
Also, our favorite sports athlete or musician (who we wouldn’t necessarily think to categorize them in this work area), but their activities in a state resembles that of a digital nomad entrepreneur. An “amusement tax” is recognized by states in some form of professional entertainment income tax generated from events such as movie tickets, concerts, and sports that organizations may be required to collect. But also, entertainment/sports professionals are individually liable for income taxes due to income derived from performing in a state.