If your business is located in one state and all your employees are resident of the same state than your tax withholdings are simple and easy. Your state income tax withholding obligations will be relatively straightforward.

The income tax withholdings become complex when your operations expand beyond the borders of a single state. You may have to withhold taxes for several states, depending on the employees’ states of residence and the location of their workplaces.

Businesses also face difficulty when they send their employees to other states to perform services or employ residents of other states at a single in-state site. The issue arises when tax laws are different in the home office and the other office. The employer than has to find out which policy they need to follow. Many questions arise in such a situation for which employers seek legal advice.

Before you can conclude whether you have a state income tax withholding obligation with respect to a given employee, you’ll need to understand the rules of both the states where you’re doing business and the states whose residents you’re employing.


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