The Wisconsin Department of Revenue announced that the temporary nexus and income tax relief for COVID-19 explained in Tax Bulletin #211 expires effective January 1, 2022. (See EY Tax Alert 2020-2624.)

Through December 31, 2021, the following temporary provisions applied.

Nexus

The Department did not consider an out-of-state business to have nexus if its only activity within the state was employees working temporarily from their Wisconsin homes during the COVID-19 national emergency.

Wisconsin state income tax withholding

The rules governing the employer's requirement to withhold Wisconsin state income tax from wages did not change except that the withholding requirement did not apply to an out-of-state business if its only activity within the state was employees working temporarily from their Wisconsin homes during the COVID-19 national emergency.

The Department provided the following examples of the state's income tax withholding requirements.

Example 1- Facts

• Company A was located in Wisconsin.
• Individual B was a resident of Minnesota and an employee of Company A.
• Prior to the COVID-19 national emergency, Individual B commuted daily to work for Company A in Wisconsin.
• During the COVID-19 national emergency, Company A allowed Individual B to work from her home in Minnesota.

Example 1 — Results

Wages paid to Individual B prior to the national emergency were subject to Wisconsin income tax because she was physically present in Wisconsin while performing services and Company A was required to withhold Wisconsin state income tax from these wages. Wages paid to Individual B during the COVID-19 national emergency were not subject to Wisconsin state income tax because she was not physically present in Wisconsin while performing services and Company A was not required to withhold Wisconsin state income tax from these wages.

Example 2 — Facts

• Company D was located in Minnesota.
• Individual E was a resident of Wisconsin and an employee of Company D.
• Prior to the national emergency, Individual E commuted daily to work for Company D in Minnesota.
• During the COVID-19 national emergency, Company D allowed Individual E to work from his home in Wisconsin.
• Company D had no other activities in Wisconsin during the COVID-19 national emergency.

Example 2 — Results

Wages paid to Individual E prior to the COVID-19 national emergency were subject to Wisconsin state income tax because he was a resident of Wisconsin. However, Company D was not required to withhold Wisconsin income tax from these wages because of the special agreement between Wisconsin and Minnesota.

Wages paid to Individual E during the COVID-19 national emergency were subject to Wisconsin state income tax because he is a resident of Wisconsin. However, because Company D was not considered to have nexus in Wisconsin during the COVID-19 national emergency it was not required to (but may) withhold Wisconsin state income tax from Individual E's wages.

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