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Nexus is defined as a relationship or connection between two or more parties. Tax laws use the term “nexus” to describe a situation where a business has a presence in a particular state, establishing a connection between the state’s taxing authority and the business. As the remote work environment became more prominent, even before the COVID-19 pandemic, states began implementing what is known as “telecommuting nexus.”

Telecommuting nexus occurs when an out-of-state business has remote employees telecommuting from a state where the business does not otherwise have a presence. Historically, states across the country have viewed the presence of a single remote employee within their state  as sufficient to create nexus, resulting in various filing and reporting obligations. Some obligations include corporate income tax, sales tax, and withholding tax.

The COVID-19 pandemic created a large influx of employees working from home as a matter of public health, safety, and welfare. In response, many state Divisions of Revenue and Taxation across the country temporarily waived the impact of the legal threshold that treats the presence of employees working from their homes in a state as sufficient nexus for out-of-state businesses. As the pandemic comes to an end, so do the temporary rules. States that have already announced their shift back to pre-COVID telecommuting rules include Pennsylvania and Massachusetts.


  • The Pennsylvania Department of Revenue announced that their COVID-19 telecommuting rules will end on June 30, 2021. As of July 1, 2021, out-of-state businesses with remote employees telecommuting from Pennsylvania will have nexus in the state.


  • The Massachusetts Department of Revenue announced that their COVID-19 telecommuting rules will end on September 13, 2021. As of September 14, 2021, out-of-state businesses with remote employees telecommuting from Massachusetts will have nexus in the state.

While there has been no formal announcement regarding a shift back to original telecommuting rules, it is important to be mindful that states including New Jersey, New York, and Connecticut are approaching the end of their public health emergencies from the pandemic. As a result, their traditional state nexus rules are expected to come back into effect.

The nexus implications could be significantly greater and more widespread as many businesses shift their workplace to a more remote setting. If your company has employees telecommuting from across state lines, you may have nexus that will trigger filing and reporting obligations in states where your company has not historically filed. If you have any questions regarding this or any other state and local tax matter, please contact your WilkinGuttenplan advisor.

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