US State-to-State Business Travel Compliance and Risks
By Fernando Lopez, Prager Metis International LLC
While organisations often overlook tax-compliance requirements related to business travel, the days of simply traveling to and working in a different state or country for business without a thought to tax liabilities are coming to an end. Looking for additional tax revenue, US state taxing authorities are becoming stricter and more vigilant in monitoring business travel.
Extensive time spent on business travel in a country outside the US, or even a different state within the US, could create a PE exposure for the employing entity.
All US states have different reporting, withholding, and filing obligations for individuals performing services. The compliance obligations vary for the employer and the employees. Penalties and interest for noncompliance vary by state. Internationally, immigration and tax offces have started to exchange information on travellers for increased compliance.
Bottom line, to avoid taxcompliance risks, employees and employers must become compliant with their payroll withholding, reporting, and filing obligations. Some simple dos and don’ts might include:
1. Differentiate between what is tax liable and what is not. If individuals are traveling for a conference, the risks are probably low. But risks might increase if individuals in a jurisdiction are developing business or signing contracts.
2. Document clear guidelines and policies. For instance, create a risk-tolerance threshold on number of days where the company would start reporting/withholding.
3. Keep in mind country-specific and state-specific regulations.
4. Evaluate the possibility of tracking all business travel via a central team.
5. Look internally or externally for technical solutions to track and monitor all business travel.
6. Because clear and documented data is the best defence if a tax authority comes calling, centralised teams and technology will help in maintaining information.
And finally, like any other change in the organization, treat this as just that, a change.
Fernando LopezGGI member firm
Prager Metis International LLC
Advisory, Auditing & Accounting, Corporate Finance, Fiduciary & Estate Planning, Tax
Basking Ridge (NJ), Coral Gables (FL), El Segundo (CA), Las Vegas (NV), New York (NY), White Plains (NY), Woodbury (NY), McLean (VA), USA
T: +1 212 643 00 99
Prager Metis International LLC is a top accounting firm providing a full range of accounting, audit, tax, and advisory services to domestic and international clientele in a wide range of industries. With 17 offices worldwide, they have a level of expertise and a unique global presence that makes your world, worth more.
Fernando Lopez is a Director of International Tax at Prager Metis International LLC. He advises his clients on a full range of cross-border tax planning and compliance matters aimed at efficient cross-border structures and operations. Fernando always makes it his initial objective to establish a personal relationship with all his clients that promotes a healthy and strong understanding of their businesses and operations. Prior to joining Prager Metis, he worked with Big Four firms in Silicon Valley, Stamford, Atlanta, South Florida, and Paris.
Published: International Taxation Newsletter, No. 11, Autumn 2019 l Photo: mokee81 - stock.adobe.com