Income/Franchise:
Massachusetts DOR Reminds that Special Pandemic-Related Telecommuting Rule Expired September 13

Tax Filing Season Frequently Asked Questions: Employees working remotely due to the COVID-19 pandemic: Expiration of the Emergency Pandemic Income Sourcing Rules for Non-Resident Employees, Mass Dept. of Rev. (9/13/21). Following its implementation of an administrative regulation on COVID-19 pandemic-related telecommuting and the sourcing of income for residents and nonresidents – including special rules for wages or other compensation paid to employees who are working remotely (working from home or a location other than their usual work location) due to the COVID-19 pandemic [see State Tax Matters, Issue 2021-10, for more details on this rule] – the Massachusetts Department of Revenue (Department) reminds that this special rule expired on September 13, 2021. Accordingly, for the period beginning after September 13, 2021, wages paid to a nonresident employee are no longer sourced based on where the employee worked prior to the COVID-19 state of emergency but rather where the employee’s work is actually performed.

For Massachusetts-based companies, the Department explains that after September 13, 2021, an employer must withhold Massachusetts personal income tax from wages paid to a nonresident employee for work performed in Massachusetts. Moreover, the Department explains that Massachusetts-based employers generally do not need to withhold Massachusetts personal income tax from wages paid to a nonresident employee for work performed in another state, even if the employee worked in Massachusetts before the Massachusetts COVID-19 state of emergency and is telecommuting from outside of Massachusetts due to the COVID-19 pandemic. The Department also provides that to the extent that a nonresident employee works part-time in Massachusetts and also part-time in another state, the Massachusetts-based employer must withhold Massachusetts personal income tax from wages paid to the employee for the portion of the work performed in Massachusetts, and will not be required to withhold from wages paid for the portion of the work performed outside Massachusetts.

For non-Massachusetts-based companies, the Department explains that after September 13, 2021, an employer must withhold Massachusetts personal income tax on all wages paid to a resident employee for work performed in Massachusetts, regardless of whether the employee worked outside of Massachusetts before the Massachusetts COVID-19 state of emergency and regardless of whether the employee is telecommuting from Massachusetts due to the COVID-19 pandemic. Please contact us with any questions.