Post-Pandemic Nexus in Georgia

The Georgia Department of Revenue (DOR) recently updated their FAQ on nexus as a result of the COVID virus.

This results from the use of the word “temporary” in the original pronouncement. The original FAQ response from DOR is shown below:

“The temporary protections provided under this guidance will extend for periods of time where:

  1. There is an official work from home order issued by an applicable federal, state or local government unit, or
    2.
  2. Pursuant to the order of a physician in relation to the COVID-19 outbreak or due to an actual diagnosis of COVID-19, the employee is working at home. Additionally, the subsequent 14 days are included in the time period to allow for a return to normal work locations.”
Now that effective, generally, after mid-night on June 15th, most of the Georgia Governors order has been lifted, the word “temporary” no longer fits the situations.

The new guidance deals with the situations where employers have authorized their employees to work from home or the employees have voluntarily decided to work from home.

In those situations, the existing rules, prior to the pandemic have returned to the workplace. Nexus can now be established for the employer by having payroll in Georgia. For example, an Alabama employer with employees who choose to reside in Georgia may now have nexus in Georgia by the existence of Georgia payroll and would therefore be required to register in Georgia and be subject to Georgia taxation, as well as perhaps local filings. Payroll being one of the three factors for determining income taxation (payroll, property and income).

An out of Georgia employee whose Georgia employer allows them to work from home in another jurisdiction, may be come subject to Georgia withholding taxes.

Further consideration should be given to the Wayfair decision and whether the income generated in Georgia is subject to state or local sales taxes. Georgia having enacted laws regarding dollar volume of sales and/or number of transactions.

The new guidance is shown below, with the new wording Emphasized, bold and underlined:

Q. If my employees are working from home due to the Corona Virus pandemic, does that modify my company’s nexus determination or the amount of my employee’s Georgia wages and therefore my company’s Georgia income tax withholding obligation?

A. In response to the remote work requirements associated with the Corona Virus pandemic, the Department will not use someone's relocation, that is the direct result of temporary remote work requirements arising from and during the Corona Virus pandemic, as the basis for establishing Georgia nexus or for exceeding the protections provided by P.L. 86-272 for the employer of the temporarily relocated employee. Also, if the employee is temporarily working in Georgia, wages earned during this time period would not be considered Georgia income and therefore the company is not required to withhold Georgia income tax.

The temporary protections provided under this guidance will extend for periods of time where:

  1. There is an official work from home order issued by an applicable federal, state or local government unit, or
  2. Pursuant to the order of a physician in relation to the COVID-19 outbreak or due to an actual diagnosis of COVID-19, the employee is working at home. Additionally, the subsequent 14 days are included in the time period to allow for a return to normal work locations.

Also

  1. If the person remains in Georgia after the temporary remote work requirement has ended (whether voluntarily or if required by the employer), the normal rules for determining nexus, the employee’s wages, and the employer’s income tax withholding obligation will apply. As such once the temporary work requirement ends, the company would have nexus. Also withholding on the employee starts since the employee will be subject to income taxation from the time the temporary work requirement has ended.
  2. A company may not assert that solely having a temporarily relocated employee in Georgia, under the circumstances described above, creates nexus for the company or exceeds the protections of P.L. 86-272 for the company.
  3. Wages paid to a nonresident employee that normally works in Georgia but that is temporarily working in another state, under the “temporary protections” circumstances described above, would be considered Georgia wages and the employer should continue to withhold Georgia income taxes.

Much planning and consultations with clients must be done, especially in those situations where the individual is attempting to claim a deduction for an office in the home. What are the consequences of taking this deduction, both for the individual employee and/or the employer. Please remember to consider local (town, county, city) filing requirements for the establishment of an office in a jurisdiction and other filing fees. In addition, sales tax rates vary by jurisdiction.

Stay tuned as Art will discuss this issue in his next Tax Bites webcast for the Society.

Arthur Auerbach, CPA, CGMA is an independent tax consultant located in Atlanta, Ga., specializing in tax consulting and estate and financial planning for individuals and closely held businesses. He is affiliated with the Asbury Law Firm as a consultant.