Ask HN: Remote US employees = tax nightmare?
Just recently, a big accounting firm did a review of our finances. They informed me that because we have US employees, the IRS "may" consider us to have physical offices in each state where they work. It also applies to contractors that worked on a single project for us for 183 days or more. The issue is, that now means having to collect and pay sales and income taxes in that state.
The "may" part is important, because each state has very different rules to what they consider having a "nexus" in their state. They also have different and complex rules as to what is taxable when it comes to software.
Did you know that SAAS apps aren't taxable in Michigan, if "no code is transferred to the customer", but if an "incidental" amount is transferred, it is? (as determined by the Department of Treasury)... I know this now.
The big accounting firm could not even say with certainty if some states will or will not be considered taxable, because the laws are so vague. They were quite adamant however that this is an important liability that needs to be addressed.
Has anyone else run into this before? It would seem that it applies to any startup that hires remote staff in the US.