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U.S. workers and businesses face enough challenges –an over-burdensome and confusing patchwork of nonresident income tax laws should not be yet another. Currently, some states require employer withholding from a nonresident employee on the first day of travel within the state. Other states require withholding only when a specific threshold has been reached – a number of days in the state or some monetary amount. And this is only for the employer side. Different thresholds and requirements may apply on the employee side for when tax begins to be owed. This creates myriad administrative and compliance challenges.
That’s why the Chamber strongly urges passage of the Mobile Workforce State Income Tax Simplification Act, H.R. 2315. This legislation provides for a uniform, fair, and easily administered law and helps to ensure that the correct amount of tax is withheld and paid to the states without the undue burden that the current system places on employees and employers. The Act provides a uniform 30-day threshold before liability attaches and withholding is required. After 30 days, existing state laws will apply. Consistent with current law, the legislation provides that an employee’s earnings are subject to full tax in his/her state of residence. In addition, under the legislation, an employee’s earnings would be subject to tax in the state(s) within which the employee is present and performing employment duties for more than 30 days during the calendar year. As under current law, nonresident employees who visit a state for longer than 30 days (and are therefore subject to that state’s nonresident filing and withholding rules) will still be able to take a credit against their resident state personal income tax liability for amounts paid to other states.
It’s time for the House and Senate to act and give employees and employers relief from complying with the current patchwork of complicated nonresident income tax laws.
Mobile workforce legislation is one of several important commerce related issues being debated right now on Capitol Hill. On another of those issues, relating to online sales tax collection, the Chamber also believes it’s vital that Congress address the issue and put all businesses “on an equal footing.”
As the Chamber has noted, we strongly believe that:
[T]he best path forward is to enact federal legislation where… business can participate in the drafting and development of a solution that both creates a uniform framework to address this issue while also providing the requisite protections to address the business community’s compliance and litigation concerns associated with sales tax collection.
Comprehensive tax reform gets much of Congress’ attention – and rightfully so, as it’s badly needed. But in the meantime, Congress needs to attend to certain nuts-and-bolts tax issues, like mobile workforce legislation and online sales tax collection.
The Chamber strongly urges Congress to enact H.R. 2315 as they continue work on legislative solutions to other important interstate commerce questions.