'Road Warrior' Income Tax Laws Vary Widely among States It's a Nightmare for Businesses to Keep Up with the Different Regulations

By Povich, Elaine S | Pittsburgh Post-Gazette (Pittsburgh, PA), December 22, 2013 | Go to article overview

'Road Warrior' Income Tax Laws Vary Widely among States It's a Nightmare for Businesses to Keep Up with the Different Regulations


Povich, Elaine S, Pittsburgh Post-Gazette (Pittsburgh, PA)


A crazy quilt of laws governing state income taxes for "road warriors" -- residents of one state who work in another -- can make tax collections a nightmare. Yet states don't necessarily favor streamlining the system under a proposed federal law.

The way it works now, states have varied standards for requiring workers to file personal income tax returns when those employees work for periods of time in a state where they don't live. The rules also dictate how employers withhold income tax for those employees.

Some states, such as New York, carefully monitor out-of-state workers; other states are less vigilant about it, according to the Council on State Taxation, or COST, a Washington, D.C.-based trade association for multistate corporations.

Some states have a "first day" rule, which means if you set foot in a state you don't live in and work there for one day, you owe that state income tax. Other states have varying periods of time when the nonresident income tax kicks in, ranging from 10 days to 60 days. To complicate things further, some states do not assess the income tax on a time-worked basis; rather, they assess it on an income-earned basis starting at a floor of anywhere from $300 to $1,800 a year, according to the Council on State Taxation.

Corporations would like to see a streamlined standard for withholding and collecting income taxes on nonresidents and are backing federal legislation that would make all state tax rules conform. COST officials say it's a nightmare for businesses to keep up with the different regulations.

"The problem is people who travel to other states for work. I travel to 20 or 30 states a year," said Doug Lindholm, president and executive director of COST. "Half of the states, the requirement is that as soon as I work in that state, I owe them a personal income tax return and the company has a withholding responsibility. It's a 'gotcha' waiting to happen.

"Very few people comply with it, and very few companies comply because they don't know where their employees are all the time."

Mary B. Hevener, an attorney with the Washington, D.C., firm of Morgan Lewis who specializes in interstate tax issues, said many companies are developing software that can handle the myriad state laws regarding "road warrior" workers. …

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