One of the bigger headaches for staffing firms that place temp workers across state lines is the jumble of tax laws that have to be considered.
Agencies who contract with a back-office provider or a payroll service may only need one aspirin, but for those firms who handle their own payroll, figuring out a multi-state worker’s withholding can take a whole bottle of Excedrin. And it’s not just applying the right rates, there’s also the whole matter of accurate timekeeping by the employees.
Most of the 41 states with an income tax impose it on non-residents with income earned in the state. “The thresholds differ widely,” says the American Payroll Association, “including various numbers of days worked within the state and various wage amounts earned.”
Colorado, for example, taxes the wages of anyone working even one day in the state. Arizona and Hawaii don’t start collecting until after 60 days of wage-earning in their respective states.
Because of the mobility in the tri-state area, some of the biggest issues arise for agencies in New York and New Jersey, and, to a lesser extent, for those in Connecticut. It’s not uncommon for an agency in New York City to send workers to an employer in New Jersey and vice versa. This is especially true in healthcare.
To simplify matters, Congress is considering a bill that would start every state’s taxing clock at 30 work days for all except “professional athletes, professional entertainers, and public figures who are persons of prominence who perform services for wages or other remuneration on a per-event basis.”
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With 45 co-sponsors, the “Mobile Workforce State Income Tax Simplification Act of 2015” is getting bipartisan support. Introduced only a month ago, it already has been supported by the American Institute of CPAs and the American Payroll Association and Americans for Tax Reform among a handful of others.
However, the bill has some powerful opposition. The Multistate Tax Commission favors a 20-day employment threshold rather than the 30 days in the bill. The National Governors Association, which has not yet taken an official position, sent its executive director to question parts of the bill at a hearing earlier this month. And organized labor took a strong stand against it.
Similar efforts in years past have failed, in large part due to the opposition of states that stand to lose tens of millions in tax revenue — one estimate is a cumulative $2 billion. Although the bill got a less than warm reception at the hearing, the growing numbers of multi-jurisdictional wage earners may give it more impetus this year. Staffing agencies are only one of the businesses impacted; companies with multi-state offices and production facilities are increasingly moving workers around for short-term assignments.