In TIR-20-10 the Massachusetts Department of Revenue announced that it has updated its guidance concerning income tax withholding, the assertion of nexus and the requirement for participation in the Massachusetts Paid Family and Medical Leave (PFML) program when employees are temporarily working in the state due to COVID-19.

TIR-20-10 supersedes guidance provided in TIR-20-5. (See EY Tax Alert 2020-1081.)

Effective date

The guidance in TIR-20-10 is effective from March 10, 2020, until the earlier of December 31, 2020, or 90 days after the state of emergency in Massachusetts is lifted. As of that date, this special relief no longer applies and the presence of an employee in Massachusetts, even if due solely to COVID-19, will result in the imposition of the general rules under Massachusetts law.

Income tax withholding

The presence of one or more employees working remotely in Massachusetts will not, by itself, create a Massachusetts state income tax withholding obligation, provided the remote work is related to:

• A government order issued in response to COVID-19
• A remote work policy adopted by an employer in good faith compliance with federal or state government guidance or public health recommendations relating to COVID-19 or
• The worker's compliance with quarantine, isolation directions relating to a COVID-19 diagnosis or suspected diagnosis, or advice of a physician relating to COVID-19 exposure (collectively, "Pandemic-Related Circumstances") (See 830 CMR 62.5A.3.)

Assertion of nexus for sales and use tax and corporate excise tax

One or more employees working remotely in Massachusetts solely due to COVID-19, and business property reasonably needed for their use while working remotely, will not cause a business to be subject to sales and use tax or to corporate excise (or corporate apportionment adjustments) tax.

Businesses claiming a nexus exemption due to COVID-19 must maintain written records sufficient to substantiate the existence of a COVID-19-related circumstance with respect to the employee(s) triggering the exemption.

Paid family and medical leave

Under the Massachusetts PFML program, businesses are required to collect and remit PFML contributions on behalf of individuals who perform services in Massachusetts.

An individual who previously performed services outside of Massachusetts and was not subject to PFML will not become subject to PFML solely because the individual is temporarily working from home in Massachusetts due to COVID-19. Likewise, an individual who previously performed services in Massachusetts but is temporarily working from home outside of Massachusetts solely due to COVID-19 continues to be subject to the PFML rules.

The Executive Office of Labor and Workforce Development intends to issue additional guidance regarding the application of the PFML rules once the rules in TIR-20-10 cease to be in effect.

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