Employees don't realize that taxes are the reason companies generally don't allow for remote positions. It's not just payroll taxes at stake.
In a nutshell, having an employee in a tax jurisdiction creates a taxable nexus for the company, meaning that they can be subject to income taxes, commercial taxes, sales taxes/VAT, etc., in that jurisdiction. (And note: this has been part of domestic and international tax law for decades.)
For example: Company C in CA has an employee, E, who moves to NY to work remotely. Company C is now subject to NY income taxes, and must now collect NY sales tax if they have any sales to NY customers (though note: in the US many states now require sales tax collection even in the absence of physical presence, so C may already have been obligated to collect NY sales tax). If E is a programmer, the NY income tax exposure is probably very low, but if E is in sales, they could be looking at significant NY tax liabilities based on how they may be required to apportion (aka allocate) their income between CA and NY.
As I understand it, no--assuming you are not in the office over some threshold (which I don't know). If you commute from NH to Massachusetts you do need to pay MA income tax. And, oh, if you live in MA and commute to NH, you also have to pay MA income tax. I've definitely seen people who live in NH and used to commute to MA switching to being fully remote in the current situation.
Funny you bring that up. There's on ongoing case[1] involving New Hampshire and Massachusetts about that exact scenario that's likely to end up debated by the Supreme Court. In essence, does a state have, absent special status like 503(c), the right to apply income tax on activities/services for rendered in different state? If so, that implies that any and every money-making activity done in any part of world may be taxable even if one person in Massachusetts pays for it. This would apply whether the activity is part of an individual sale[2], employment, or contract work as would it apply, mutatis mutantis, for every other state.
I'm not sure I understand how that even works with larger companies. I live in MA but if I lived in NH, I'd only be working for my company in MA in the sense that it's the closest office. Company HQ is in NC and I work a lot with people all over the world. I haven't read all the background but surely MA doesn't say someone owes MA income tax because they could theoretically commute 2 hours to an office there.
ADDED: So I guess (although it's not super-clear) that it's a matter of being officially assigned to an office and maybe going in semi-regularly. Presumably if someone is 100% officially remote at a company with many offices, it wouldn't apply. https://andersen.com/pressroom/telecommuters-beware-of-state...
>>surely MA doesn't say someone owes MA income tax because they could theoretically come 2 hours to an office there.
The you'd be surprised what certain states would say, do, and compose in their legal briefs to justify extracting as much money as possible.
Also IANAL, so take what I have to say with a grain of salt.
Presumably, there could be some kind of test. If someone lives in NH but is 100% WFH, he may be subject to MA income tax under the following standard:
1) If the company is headquartered or incorporated in MA
2) If the work done is provided (a) to directly benefit operations of aforementioned company that are affiliated with a location in MA or (b) to be sold/provided to third party legal person(s) for which business operations /purchasing/selling would be done in MA. (i.e a business/service nexus)
there are payroll companies like https://justworks.com/ that have entities in each state to deal with the wage tax issue. that's the "easy" way as far as i know.
My understanding is that it's not "just" handling payroll taxes, unemployment, etc. There can also be paperwork around establishing legal entities which, of course, gets even more challenging as other countries are involved. It's mostly not that big a deal for large employers but it can be a fair bit of overhead for a small company--with the result that they don't want employees just working anywhere. Mitchell Hashimoto has written about this some with respect to HashiCorp.
There is paperwork, but you don't need to establish a new entity in every state/country where you have an office or employee. You can simply register your existing company as a "foreign" business in all of the jurisdictions where it is not legally incorporated (and this is what most businesses do).
Generally, you only have a location-specific business created if there are location-specific benefits acquired, or benefits avoided, by doing so. (Like say, access to tax credits, or avoidance of certain compliance responsibilities).
It would be infinitely easy to do this with Bitcoin, you could have and all anonymous all remote workforce. Wait, that's already how open source works for the most part.
Unfortunately due to US laws around employment, that isn't remotely legal. You need to pay payroll taxes and withhold income taxes for your employees, and that requires SSN/ITIN.
If your employees reside in a US state, you usually have additional obligations there related to state income tax withholding or state unemployment insurance, as applicable.
This greatly oversimplifies how it actually works to be a foreign Corp in many states. You might be able to get away with this for a year or two but you will eventually be in a world of hurt. Once you have an employee in a state and you are making sales on that state, the tax and regulatory bodies will come after you. Your customers and partners will be reporting you, your payroll provider will make mistakes, and disgruntled employees will make claims in that state and it will be a significant drain on company resources.
??? This is literally how most multi-state businesses operate: 1 company, registered as a "foreign business" in other states, with a single multistate payroll provider like ADP handling the payroll function. (Yes, the company will be subject to tax and legal service in any state in which it has an employee, which is why generally when I was still at a firm I generally advised clients against remote employee arrangements.)
Note that a "foreign business" is a technical term in this context, simply meaning that a business operating in one state that is incorporated in another state. (See for example https://www.californiaregisteredagents.net/incorporation/for...) For example, almost every YC company is incorporated in Delaware, but is registered as a "foreign business" in CA where they are physically headquartered.
At the international level you usually form subsidiaries, due to the vast differences between laws at the national level, but some companies will simply register a "branch office" in other countries in which they have small operations. In fact, many countries, like the U.S., have tax forms specifically for these companies: the Form 1120F...
I read your basic point though that there are complications/expenses associated with having remote employees in other states ("I generally advised clients against remote employee arrangements"). I've worked for very small firms that did this so it couldn't have been too onerous. But it does serve to highlight that, especially small, companies aren't indifferent to where employees move to even if they're remote (and may prohibit certain moves).
The main issue is that having a full time employees in a state creates a "nexus" in that state, which means you need to file a bunch of tax things and deal with regulatory issues you wouldn't otherwise need to. At the size of coinbase, its probably pretty simple to deal with and doesn't cost much relative to their bottom line, for a 15 person company, it is much easier to deal with 1-2 states than to deal with 15. You can avoid paying sales tax in some areas based on how this works out when you are small but not when you are large. Justworks doesn't help with the whole tax nexus issue, just providing benefits.
In a nutshell, having an employee in a tax jurisdiction creates a taxable nexus for the company, meaning that they can be subject to income taxes, commercial taxes, sales taxes/VAT, etc., in that jurisdiction. (And note: this has been part of domestic and international tax law for decades.)
For example: Company C in CA has an employee, E, who moves to NY to work remotely. Company C is now subject to NY income taxes, and must now collect NY sales tax if they have any sales to NY customers (though note: in the US many states now require sales tax collection even in the absence of physical presence, so C may already have been obligated to collect NY sales tax). If E is a programmer, the NY income tax exposure is probably very low, but if E is in sales, they could be looking at significant NY tax liabilities based on how they may be required to apportion (aka allocate) their income between CA and NY.