October 28, 2020
Maine issues guidance on income tax withholding and nexus when employees are working temporarily in the state due to COVID-19
Maine Revenue Services (MRS) has issued guidance explaining the personal income tax, income tax withholding and corporate income/sales tax nexus provisions that apply when employees are temporarily working in the state due to COVID-19.
Resident income tax withholding
Maine income tax withholding for wages paid in 2020 to a Maine resident suddenly working in Maine due to another state's COVID-19 state of emergency will continue to be calculated as if the Maine resident were still working outside the state under the rules set forth in MRS Rule 803, Section .04(B).
Specifically, Maine income tax and income tax withholding apply to all wages paid to Maine residents regardless of the state where the wages were earned. A reduction to Maine resident income tax withholding is allowed for any income tax withheld under the laws, rules or regulations of the nonresident state for the applicable payroll period.
Maine individual income tax
For tax years beginning in 2020, if an estimated income tax payment penalty is due by a Maine resident taxpayer as a result of the taxpayer suddenly working in Maine due to another state's COVID-19 state of emergency, MRS will abate the penalty upon request by the taxpayer.
Governor Janet Mills will introduce legislation in January 2021, pursuant to tax years beginning in 2020, that will ensure Maine residents can avoid double taxation as a result of COVID-19 related telework by allowing a tax credit for income tax paid to other jurisdictions if another jurisdiction is asserting an income tax obligation for the same income despite the employee no longer physically working in that jurisdiction due to COVID-19.
Sales tax nexus
For sales occurring in 2020, MRS will not consider the presence of one or more employees in Maine, who commenced working remotely from Maine during the state of emergency and due to the COVID-19 pandemic, to constitute substantial physical presence in Maine for sales and use tax registration and collection duty purposes.
Corporate income tax nexus
For tax years beginning in 2020, MRS will not consider the presence of one or more employees in Maine, who commenced working remotely from Maine during the state of emergency and due to the COVID-19 pandemic, to establish, by itself, Maine corporate income tax nexus.
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