Well-respected House Ways & Means-Education Committee Chair Danny Garrett (R-Trussville) has introduced HB 379, a bill designed to provide guidelines and a safe harbor for employers who have traveling employees or remote workers. The current version of the bill is based in part on the Council on State Taxation (COST)/AICPA model legislation (more on this below). COST is advocating passage of the uniform law across the country and six to seven states so far have enacted it in whole or in large part. U.S. Sen. John Thune (R-South Dakota) recently introduced Bill S. 1443, federal legislation to the same end.
In short, if your traveling or remote employee is working in a state with this model act for less than 30 days in a calendar year, you (the employer) aren’t required to register with that state’s taxing authorities or withhold and remit that state’s income tax from the employee’s wages. However, if the employee works more than the safe harbor number of days, he or she is subject to income tax withholding in that state retroactively to the first day of his or her presence in that state.
Alabama is one of several states that asserts tax jurisdiction over a nonresident employer and its employees if they work in this state more than one day in a year.
We understand that Rep. Garrett has agreed to amend his bill to more closely conform with the COST/AICPA model act – and to add an exemption for employers with employees who enter this or another state to conduct disaster relief efforts. Thankfully, the Alabama Department of Revenue is working with Chairman Garrett and, like the authors, is now reviewing a proposed amendment to that end. If your business has traveling or remote workers, this bill should be important to you. Organizations supporting the bill, as amended, include the Alabama Society of CPAs, Manufacture Alabama, COST, and the AICPA.
Chairman Garrett predicts that the bill will come up for a vote in his Committee this week.
