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South Carolina Extends Prior Guidance on Tax Implications of Remote Work

    Client Alerts
  • September 02, 2021

Last Thursday, the South Carolina Department of Revenue issued an information letter extending its prior ruling that employees temporarily working from South Carolina residences due to the COVID-19 pandemic will not create a nexus for purposes of state income and sales tax withholding. This decision is especially important for Charlotte employers with significant numbers of employees working from home across the state line.

Had South Carolina taken a different position, the presence of these employees working in that state could have resulted in claims by SCDOR that out-of-state companies must pay South Carolina state taxes based on their employees’ work locations. The extension lasts through December 31, 2021, and could be extended further if the pandemic continues.

Not every state is taking the same view of this question as South Carolina. States looking to increase tax revenues have in the past adopted very liberal definitions of what it means for companies to create a taxable nexus in those states. Employers should check with their tax professionals to determine whether a temporary or permanent remote workforce triggers state tax liabilities.