The South Carolina Department of Revenue has announced another extension of temporary nexus and income tax withholding requirements for employers with workers who are teleworking because of the COVID-19 pandemic.
Information Letter 21-22, dated August 25, extends the temporary relief — initially provided in May 2020 via Information Letter 20-11 — through December 31.
Under South Carolina law, businesses in the state are required under S.C. Code of Laws section 12-8-520 to withhold income tax on the wages of residents and nonresidents who work there. South Carolina residents who work out of state are not subject to withholding if their wages are subject to withholding in the state in which they work.
In Information Letter 20-11, the department said that for the period of March 13, 2020, to September 30, 2020, it would not “use the temporary change of an employee’s work location during the [relief period] to impose a South Carolina withholding requirement under Code Section 12-8-520.” The relief does not apply to workers whose status changes from temporary to permanent during the relief period.
The department also said it “will not use changes solely in an employee’s temporary work location due to the remote work requirements arising from, or during, the COVID-19 relief period . . . as a basis for establishing nexus or altering apportionment of income.”
The relief was first extended to December 31, 2020, then to June 30, 2021, and again to September 30, 2021.
Kathleen Quinn, partner at McDermott Will & Emery, told Tax Notes in an email that she thinks state tax departments are responding to the changing circumstances of the pandemic much like the rest of us and that "companies have to closely track nexus and withholding relief provisions in states where they have employees working remotely due to the pandemic."
"I think folks intended to return to the office at the end of the summer, but now expect to work remotely due to the delta COVID-19 variant until later this year. South Carolina’s guidance reflects that reality," Quinn said.
Quinn noted that New Jersey recently issued guidance stating that its COVID-19 nexus and withholding relief provisions expire effective October 1.
"Employees working remotely could trigger filing and tax obligations in some states but not others," Quinn said.