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In Technical Information Memorandum 2021-2 the Delaware Division of Revenue (DDR) provided guidance concerning the income tax requirements that apply to the wages of remote workers for employment outside the state due to COVID-19.

Prior to the COVID-19 emergency, the DDR applied the "convenience-of-the-employer rule," which asserts that if Delaware employees are working outside the state for their own convenience, and not for the necessity of the employer, those wages are sourced to Delaware for income tax purposes. (30 Del. C. Section 1124(b); Schedule W, Delaware Individual Non-Resident Income Tax Return; Flynn v. Director of Revenue, Delaware Tax Appeal Board Dkt. No. 1504 (9/14/2011).)

Since March 22, 2020, the state has been under a COVID-19 emergency declaration that caused many Delaware employers to direct that employees work from home in locations both within and outside of Delaware. Normally, wages paid to Delaware employees for remote work outside the state is sourced to Delaware under the convenience-of-the-employer rule.

In consideration of the state's COVID-19 emergency declaration, the following applies to the wages of Delaware employees working remotely outside the state.

March 22, 2020 through May 31, 2020

Due to the breadth of the restrictions under the state's COVID-19 emergency declaration that applied effective March 22, 2020, including travel limitations and quarantine requirements, Delaware taxpayers may treat all days on which they actually worked from a home outside of Delaware as days worked outside of Delaware on Schedule W.

Beginning June 1, 2020

On and after June 1, 2020, taxpayers may report days worked from home as days worked outside of Delaware on Schedule W if either:

• Their employer directed them to work from home and they were not permitted to work at the Delaware location
• Their employer strongly encouraged remote work but required they seek advance permission to return in person

Once employers give employees the discretion to return to work within their Delaware offices, those employees may no longer report days worked from home as days worked outside of Delaware on Schedule W if those employees elected, but were not required, to work remotely.

The DDR notes that it may require proof of any direction or advance permission given by an employer after June 1, 2020 concerning remote work.

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