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the income tax laws of all states in
Many states began to struggle with the which there are remote workers, includ-
ing any reciprocal agreements between
longer-term effect of telecommuting states. Unless federal action is taken, a
employees who no longer physically worked patchwork of state laws will continue to
within their jurisdictions. govern how remote working affects an
employer’s tax withholding obligations
for the foreseeable future.
Arkansas, Connecticut, Delaware, Ne- Massachusetts’s temporary tax rule an From Rebecca Gillette, J.D., Frazier
braska, New York, and Pennsylvania. In “unconstitutional tax grab.” On Jan. & Deeter LLC, Nashville, Tenn. (not affili-
each of these states, if the employee is 25, 2021, the Supreme Court invited ated or associated with CPAmerica)
working out of state at the employer’s the acting U.S. solicitor general to file
convenience, then the employer only a brief in the case, in which she argued Cryptoasset issues in state
withholds taxes for the state in which that this was not an “appropriate case and local taxation
the work was performed. for the exercise of this Court’s original Interest surrounding the use of crypto-
Further complicating the issue, some jurisdiction.” The Supreme Court assets has greatly increased in recent
states have reciprocal tax agreements, eventually declined to hear the case (see years for several reasons, including its
which allow residents of one state who New Hampshire v. Massachusetts, No. ease of transferability and finite supply.
work in another state, often a neighbor- 22O154 (U.S. 6/28/21)), and the tem- Since bitcoin’s description in a white
ing state, to avoid filing a nonresident porary tax rule expired shortly thereafter. paper posted on Halloween 2008 and
state tax return. Currently, 16 states Employees working remotely continue creation the following January, over
have some type of reciprocal agreement. to present a variety of tax-related issues 20,000 other cryptocurrencies had
In these states, the employer withholds for companies. The relationship between sprung into existence by July 2022. In
tax for the state where the employee the state where an employee works and the last few years, more institutions
lives, rather than for the state where the where she resides remains a key consid- and merchants have begun accepting
employee works. It is important to note eration from a payroll and withholding cryptoassets as payment. Additionally,
that neighboring states are not the only tax perspective. several states have been looking into
states to have reciprocal agreements, In Congress, at least two bills are possibly accepting cryptoassets as pay-
and many neighboring states do not pending as of this writing regarding a ment for taxes due. However, the recent
have reciprocal agreements at all. It is state’s ability to tax the income of a non- price crash of summer 2022 has caused
thus vital for employees and employers resident. First, the Remote and Mobile a few of those states to put these plans
alike to remain informed regarding the Worker Relief Act of 2021, S. 1274, was on hold for now. (The price of bitcoin
income tax rules of both the state of the introduced in the Senate on April 21, fell from $46,296 on April 1, 2022, to
employer and the state of the nonresi- 2021. Under this bill, income earned by $20,298 on Aug. 29, 2022.) With the
dent employee. an employee who lives in one state and rise in popularity of these new alterna-
The adoption of certain tax poli- works in another would only be taxed tive “currencies,” states are having to
cies involving remote work has already by the state of residence or any state address issues concerning cryptoasset
resulted in disputes between neighbor- in which the employee is present and transactions across multiple tax types.
ing states. On Oct. 19, 2020, New working for more than 30 days. On May This item highlights a few issues taxpay-
Hampshire requested that the Supreme 27, 2021, another bill was introduced ers should consider in income taxation,
Court exercise its original jurisdiction in the Senate called the Multi-State sales taxation, and unclaimed property/
in evaluating the constitutionality of Worker Tax Fairness Act of 2021, S. escheat reporting.
a temporary Massachusetts tax rule, 1887, under which a state would only
which required certain nonresident be allowed to tax the income of a non- Income taxation
employees of Massachusetts employ- resident if the nonresident is physically Character of cryptoassets: For
ers to treat income earned for services present in the state. Both bills have been federal income tax purposes, the IRS
performed in another state because of referred to the Senate Finance Commit- considers cryptoassets, which it gener-
COVID-19 as if the income had been tee for consideration. ally refers to as “virtual currency,” to be
earned in Massachusetts. In a press re- As teleworking is only expected property, potentially, a capital asset in
lease announcing the filing of the law- to continue, it will be crucial for both the hands of the taxpayer. Accordingly,
suit, New Hampshire’s governor called employers and employees to understand the rate of tax paid on capital gains or

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