I am currently employed by an Internet company that sells item on the web. They are based in Washington, and I work in Michigan. However, I am looking to move to Ohio soon with my fiance, and have approached my company about working remotely from home there. My company is concerned about having to pay taxes for Ohio since they will have me located there (nexus) ... they do not want to do it.
Is there any way that they can continue to employ me in Ohio, and not have to pay the Ohio taxes? Can they hire me on as a consultant instead, or can I say I'm based out of Michigan still and work out of Ohio?
Let me first preface my statement by saying that I am not yet a CPA, though I do have experience as a tax accountant in the state of New Mexico.
I took a quick look at the tax code for the state of Ohio and found the following statements:
"Every employer maintaining an office or transacting business within the State of Ohio and making payments of any compensation to an employee, whether a resident or nonresident, must withhold Ohio income tax."
"Every individual who performs services subject to either the control and/or will of an employer, whether as to what shall be done and/or how it shall be done, is an employee for the purposes of Ohio income tax. It does not matter that the employer permits the employee considerable discretion and freedom of action, so long as the employer has the legal right to control either the method and/or result of the services."
Based on this, I believe that the Ohio Department of Taxation would take the position that, even if you work from home, you are an employee of the Internet company. Even though you would be working from home, you would still be working IN the state of Ohio.
A lot of companies have employees that are "independent consultants" but who really fit the definition of an employee. That is why state tax codes usually qualify the term "employee." Unless you have multiple clients and can demonstrate that you, in fact, do not work at the will and discretion of the Internet company in question, I don't think that idea will work either. Certainly, I would not advise someone to take such a tenuous position.
Again, I want to say that I am not yet a CPA and I would advise you to consult with a CPA in the state of Ohio who specializes in tax. Good luck to you!
From your post, you didn't explicitly state what type of taxes your employer wants to avoid. Is it state payroll taxes, or is it sales tax (since being in Ohio would indeed create a nexus issue for them.) If it is strictly payroll taxes, then you should do your own reseach to find out the difference between the two states and see if you can't either refute their worries or create a compromise to offer.
As far as contractor versus employee, the state laws may vary from federal, but you can check the IRS guidelines at
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As far as working in Ohio and "claiming" to be in Michigan, that would be a bad idea. If you offer that idea to your company, if they are not, they should be offended by the suggestion of duplicity. If they have ethical standards, they might interpret that if your willing to "fudge" on tax reporting, you might also be willing to "fudge" when reporting to them!
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