COVID-19 Telecommuting: State Guidance on Business Tax Nexus Is Inconsistent and Incomplete

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Millions of Americans are working remotely during the COVID-19 pandemic—and many are expected to carry on this lifestyle after the virus is under control.1 Some will even relocate to other states to be closer to family, access more affordable housing, or improve their quality of life in other ways.2

A great deal has been written about the effects of this societal shift on productivity, corporate culture, and how work gets done3—but what about the tax implications?

Well, it’s complicated. And largely unclear. In some cases, for example, a lone employee working in a state can trigger sales and use tax collection obligations for their employer—even if the company has no other physical presence in the state and its sales are below thresholds that would require collection. A few states have temporarily waived the sales and use tax consequences created when workers are temporarily forced to telecommute from the state due to COVID-19, but most have not.

Economic Nexus & Physical Presence Nexus

In the 2018 case South Dakota v. Wayfair, the US Supreme Court ruled that companies can be subject to tax obligations if they have economic nexus in a state—that is, if they meet the state’s legislated sales threshold. Previouslynexus depended on a company’s having a physical presence in the state, which could be an office building or storefront, a third-party repair person, or an employee engaged in solicitation.

In the wake of Wayfair, most states provided a sales tax nexus “safe harbor” to small sellers whose remote sales don’t reach a threshold established by the state, often $100,000 or 200 transactions. However, increased telecommuting during the COVID-19 pandemic means that businesses may have unexpected sales and use tax collection obligations—under physical presence nexus rules—in states from which their employees are newly telecommuting.

This means that if a state considers the presence of an employee sufficient to establish nexus, economic nexus thresholds would be irrelevant. Physical presence is enough. In these cases, businesses must register and collect applicable sales and use taxes on all taxable transactions once physical presence nexus is established—so a single telecommuter in a state can have significant consequences.

In the COVID-19 era, sales and use tax nexus issues arising from telecommuters have raised important questions. For example, some states have indicated that workers who telecommute because of the pandemic, or because emergency orders give them no other choice, will not trigger sales and use tax nexus. But what happens when those emergency orders expire? And what are the nexus consequences of remote workers who previously commuted to an office if, after the pandemic subsides, they choose to telecommute indefinitely?

Inconsistent Guidance

Unfortunately, clear answers to COVID-19-related tax questions like these are hard to come by. Guidance varies from state to state, or is lacking altogether, and no standard approach has emerged because nexus laws vary so widely.

For example, New Jersey and Illinois have legal precedents on the books indicating that, in some circumstances, a single telecommuter working in the state could trigger sales and use tax obligations.4 Currently, Illinois is addressing the issue of remote workers displaced by the pandemic on a case-by-case basis, and New Jersey temporarily waived its sales tax nexus standard for remote work made necessary by COVID-19—but has not indicated when or under what conditions the waiver will expire.

Overall, response from the states has been a mixed bag:

  • Hawaii, Idaho, South Dakota, and Texas have considered COVID-related tax relief on a case-by-case basis;
  • states including Massachusetts, Minnesota, New Jersey, Pennsylvania, and Rhode Island announced that the temporary presence of telecommuters due to the pandemic will not create sales and use tax nexus for some period; and
  • states including Arkansas, Colorado, Idaho, Louisiana, Maine, Michigan, Nebraska, Ohio, Tennessee, Utah, and Virginia as well as Washington, D.C., have made no changes to nexus policies for sales and use taxes.

To complicate matters further, most waivers are tied to emergency orders that may or may not expire or have already expired, depending on the local course of the pandemic—which creates more uncertainty for companies.

Additionally, companies whose online sales increased due to COVID-19 should carefully track those revenues if they now exceed economic state nexus thresholds in any states, regardless of whether they have telecommuting employees residing there.

Keep Current as Well as You Can

The Checkpoint Catalyst Survey of States’ Approach to Temporary Telecommuting describes how tax authorities are addressing income tax nexus, income tax apportionment, and sales tax nexus considerations for COVID-19 teleworkers.5 The information is incomplete, however, because not all states provided complete responses, and a few large states (including Florida and New York) did not respond at all. Among the states that responded, many offered nexus guidance for income tax, but not for sales and use taxes. And several states noted that their position was subject to change depending on the duration and severity of the pandemic.

For companies with employees who are temporarily telecommuting from across a state border, or who are considering making such arrangements permanent, the takeaway is: seller beware. Sales and use tax guidance related to COVID-19 telecommuting is inconsistent, uncertain, and subject to change in response to factors that are themselves fluid and evolving.

Companies should check with state authorities to understand the applicable guidelines, if there are any, and avoid hidden tax traps that may lurk in the confusion surrounding COVID-19.

At Thomson Reuters, the Checkpoint Catalyst team continues to monitor the corporate income tax nexus and apportionment consequences of the rise in remote work caused by the COVID-19 pandemic as well as the sales and use tax nexus implications of these new work arrangements.

Nadya Britton is manager, enterprise content—tax and accounting market insights and thought leadership, at Thomson Reuters.


  1. “A Third of Americans Expect to Keep Working From Home After the COVID-19 Vaccine Rolls Out,” Ipsos, December 15, 2020,, and “It’s Time to Reimagine Where and How Work Will Get Done: PwC’s Remote Work Survey,” PwC, January 12, 2021,
  2. Tom Warren, “Microsoft Is Letting More Employees Work From Home Permanently,” The Verge, October 9, 2020,
  3. Marcy Klipfel, “The Hybrid Workforce Is Emerging: Here’s How to Prepare,” Forbes, January 28, 2021,
  4. “Does Your Company Have a Multistate Sales Tax Obligation?” Thomson Reuters Tax & Accounting, December 21, 2020,
  5. Kathryn Burns, Tom Cornett, Rebecca Newton-Clarke, and Emily Porter, “The Checkpoint Catalyst Survey of States’ Approach to Temporary Telecommuting,” Thomson Reuters, accessed February 1, 2021,

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