July 22, 2020
Massachusetts updates guidance concerning income tax withholding, paid family and medical leave insurance and nexus for employees working temporarily in the state due to COVID-19
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.)
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:
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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