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Ask a Lawyer -- Corporations
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Question: Hi, I am a software developer for a small (roughly 70 employee) business in Utah that writes e-commerce software. The one office and all employees are currently in Utah. I am looking to move to Missouri and continue to work for the company out of my home (writing software on the computer). Do you know if my employer would have to incorporate/register as a foreign entity in Missouri in order for me to do this? Thank you in advance. Response: To my knowledge, this is an open issue in Missouri. The action on the telecommuting employee has been mostly on the issue of state / city income taxes; however, I think the issue of "doing business" for purposes of corporate presence is analogous. Many states assert the right to tax telecommuting employees in the state in which the employer is located (even though the work is performed in a distant location out of state) in cases where the work is remotely performed for the convenience of the employee. See Huckaby v. New York State Division of Tax Appeals (New York 2005). I assume this is your case. Thus, under the rationale cases such as Huckaby, your argument would be that you are working in Utah and not Missouri. But if 90% plus of your work is physically performed in Missouri, I think the argument is difficult to sustain. Also, there is a bill currently before Congress called the Telecommuter Tax Fairness Act of 2005. Here are the main operative provisions of the act: (1) IN GENERAL- In applying its income tax laws to the salary of a nonresident individual, a State may only deem such nonresident individual to be present in or working in such State for any period of time if such nonresident individual is physically present in such State for such period and such State may not impose nonresident income taxes on such salary with respect to any period of time when such nonresident individual is physically present in another State.This bill, ostensibly deals with tax law but I think it's provisions will also control issues of corporate nexus for determining whether or not a corporation / LLC is doing business in a state thereby requiring it register with said state. If this bill passes in Congress, I think you are deemed to be working in Missouri even though telecommuting to Utah. As such, your employer would almost assuredly be required to register with Missouri as a foreign corporation in my opinion. Even without this bill passing Congress, I still think your employer will be deemed to have minimum contracts with the State of Missouri requiring the business to register. The only out I can think of is if you switched your status from employee to independent contractor. Hiring contractors in a state is much lesser type of contact than having an employee located in that state. If your were an independent contractor and all face to face meetings with the employer took place in Utah, the argument for no registration in Missouri gets much stronger. If you wish to explore this route further, please check with a tax professional on whether you could properly be classified as an independent contractor given the facts. Submitted: 09/10/2007; Greg, Utah Response: 09/12/2007; JJR Add A Comment |
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