

Ask HN: Hiring Remotely and US Tax Nexuses - autarch

I know that a number of companies discussed on HN (such as GitHub) have a policy of hiring from anywhere in the US or in the world.<p>The company I work for has been trying to hire remotely, but we are having some trouble with the issue of tax nexuses. For example, we were interested in someone in NY state, but if we hired them we&#x27;d have to collect sales tax in that state.<p>Is there some way that companies like GitHub and others have worked around this problem?
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gamblor956
There are two types of tax nexus: federal/national, and state.

Federal/national tax nexus is a matter of federal law, and can be affected by
treaties with other countries (i.e., "permanent establishment" or "branches").
Treaties can occasionally result in a foreign person/company having a US tax
reporting requirement (i.e., tax returns) without actually owing any US taxes!

State tax nexus is an entirely separate beast which differs from state to
state and is not affected by US treaties! In some states, physical presence is
required to have a nexus; in others, merely selling to customers into the
state is sufficient. Generally, having an employee permanently working from a
state is sufficient nexus to subject a company to state tax compliance as your
company is then treated as being physical present in that state (through the
employee). However, an independent contractor might avoid nexus concerns as an
IC is usually legally and economically independent from his/its clients.

Your best bet is to talk to a NY-based lawyer (or at least, a lawyer licensed
to practice in NY).

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autarch
Yep, I'm aware of all those details. I'm just wondering if companies like
GitHub simply bite the bullet and pay sales tax in each state as needed, or if
they've found some sort of workaround (like incorporating a second entity that
hires people but doesn't receive sales revenue directly, just to make up a
random thing).

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toomuchtodo
Some companies use an intermediary, like Trinet [1]. You write them a check
every pay period, and they disburse the funds to your scattered employees for
a small fee without you having to handle the logistics of it.

[1] [http://www.trinet.com/](http://www.trinet.com/)

~~~
autarch
From research done by folks at our company this apparently does not eliminate
the nexus issue. I had high hopes for this approach but it didn't pan out.

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phantom_oracle
Isn't it as simple as hiring as a contractor instead of hiring as an employee?

Having contractors simply turns the situation from "we have labour laws to
deal with" to "this is an expense like any other", although speaking to a
labour + tax attorney wouldn't hurt.

As far as your company hiring remotely goes, tell them not do it if this is
their first time and everyone else is local.

They will get burned (almost always likely) diving in the deep end, so if they
do plan on doing it, this is (roughly) how:

Find some obscure 50-hour task and give the contractor an opportunity to
complete it (making sure it is possible to be done in 50 hours).

AFAIK, when working with "contractors", the tax-reporting burden becomes
theirs.

~~~
tptacek
It's unlawful to hire full-time employees as contractors, and there is a
somewhat elaborate test (in the sense that its results can be unpredictable
when applied under duress) used by the USG to tell the two apart.

This is, in fact, what several companies have done to resolve this problem for
foreign workers. But there is a downside.

It's a very bad idea to treat US full-time employees as 1099 contractors.
This, by the way, is one of the reasons that freelancers sometimes have a hard
time establishing a master agreement with Fortune 500 companies.

~~~
phantom_oracle
Thanks for this.

It seems like labour laws in the US are similar to other countries in this
regard.

There could actually be another way around this, as the contractor could
register his own LLC and work through that.

I'd advise the OP (again) to consult a labour and/or tax lawyer on this.

~~~
autarch
We have consulted lawyers, I was just wondering how some companies are able to
still hire from anywhere. I'm guessing that it's some combo of hiring non-US
workers as contractors and simply biting the bullet on sales tax as needed in
each US state.

~~~
logn
Can you check if sales taxes even apply? For some types of things there is no
sales tax. Also it's not the end of the world. You can use software such as
[https://taxcloud.net/default.aspx](https://taxcloud.net/default.aspx) which
is compatible with numerous systems.

