Remote work has permanently transformed payroll compliance. A company in Texas may have employees in California, New York, and Florida each with different tax rules, wage requirements, and pay frequency mandates.
Understanding Nexus
When an employee works from home in a state where your company has no office, their presence alone creates payroll tax nexus in that state. You must register as an employer, withhold state income tax, pay SUI, and comply with local wage and hour laws from day one.
Key Withholding Rules
Work State vs Residence State: Employees are generally taxed by the state where they physically work. A California resident working remotely for a Texas company owes California income tax.
Reciprocity Agreements: Some states allow withholding only for the residence state. Verify current agreements as states exit these periodically.
New York Convenience Rule: New York taxes income of employees working remotely by their own convenience, even if they never physically work in New York.
Multi-State Onboarding Checklist
When adding a new state: register with state revenue and labor, open SUI account, obtain state withholding certificate, verify minimum wage and overtime rules, and check for local income tax obligations.
Register for our 120-minute Multi-State Payroll webinar for complete guidance.