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April 22, 2020
2020-1067

Maryland will consider waiving the assertion of nexus for employees working in the state temporarily due to COVID-19

In Tax Alert 04-1420B, the Comptroller of Maryland provided guidance concerning the assertion of nexus and the income tax withholding requirements applicable to employees working temporarily in the state due to COVID-19.

The assertion of nexus for temporary work in the state due to COVID-19

Although the Comptroller stated it does not intend to change or alter the facts-and-circumstances basis it uses to determine nexus or income sourcing, it does understand that many businesses have had to temporarily alter how they deploy employees due to COVID-19, often due to gubernatorial orders for telework.

Accordingly, the Comptroller will take into account the temporary nature of work within the state due to COVID-19 in making a nexus determination, considering also whether the business correctly sourced income and whether the business properly withheld and reported employees' Maryland state income tax withholding.

The Maryland income tax withholding rules are not changed

The Comptroller emphasizes that the employer requirements for Maryland state income tax withholding are not changed. Generally, Maryland state income tax withholding is required on all wages paid to Maryland residents, regardless of where they were earned, and nonresident income tax withholding is required on all wages that are earned for services provided in the state.

An exception to the Maryland nonresident income tax withholding requirement applies to wages earned within Maryland by residents of Virginia, the District of Columbia, West Virginia, and Pennsylvania because Maryland has a reciprocal agreement with these jurisdictions.

The Comptroller points out that it does have a reciprocal agreement with Delaware; therefore, wages paid to a Maryland nonresident who is teleworking in Maryland is Maryland-sourced income, and subject to Maryland income tax withholding. Note, however, that Maryland income tax withholding is not required if annual compensation is less than $5,000. (May 2019 Maryland Employer Withholding Guide (p. 5).)

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Contact Information
For additional information concerning this Alert, please contact:
 
Workforce Tax Services - Employment Tax Advisory Services
   • Kenneth Hausser (kenneth.hausser@ey.com)
   • Debera Salam (debera.salam@ey.com)
   • Kristie Lowery (kristie.lowery@ey.com)
   • Peter Berard (peter.berard@ey.com)

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