Expert: Shirley McAllister, CPP, PHR - 2/13/2010

Question
QUESTION: I have two questions for state payroll - withholding tax rule.

First, if our company is California corporation and hire Arkansas resident who is living and working in AR not in CA, do we have to register AR payroll account for SIT and UI? If we should do it, there are anything else to do like register as foreign company, etc.

Second, please let me know states have reciprocal agreement.
We have some cases for MO and KS, and MO and IL.

I am looking forward to your answer. Thank you!

ANSWER: If the employee is working in the state than the SIT and SUTA must be paid to the state in which the work is performed unless there is a reciprocal agreement.You will also need to obtain worker's comp insurance, some states allow you to do it through a private company and in some you have to do it through the state. If you are selling any products within the state you will have to file a franchise and sales tax form and pay sales tax on any products sold since you have a nexxus in this state. You also will probably have to file in the state as a non resident company doing business in the state to get a number to use for the SUTA and SIT forms.

None of the states listed above have a riciprocal agreement with each other. Ill is the only state with reciprocal agreements in the state above and Ill has agreements with Kentucky, Michigan, Iowa and Wisconsin.

Mo, KS and AR do not have reciprocal agreements.

Shirley



---------- FOLLOW-UP ----------

QUESTION: I appreciate to your answer.

We have MO Corporation, and some of employees are residents of Kansas and Illinois.
Because Kansas City in MO is located b/w MO and KS State, and St. Louis in MO is located b/w MO and IL State.
According to your answer, those states don't have a reciprocal agreement with each other, here is additional question; Does MO Corporation have to register as non resident company to get SIT and UI tax account number for KS and IL employees even though MO corp. is not doing business in KS and IL? Or nonresident employees should file individual tax return for MO State as nonresident?

Thanks again your consideration and help.

Answer
If the work is being done in Kansas and Illinois than you need to get SIT and SUTA numbers for those states.

The employees will file resident returns for the state they live in and partial non resident returns for the states they worked in and did not live.

Shirley