Taxing Income in the New World of Teleworking

UHERO BRIEFS ARE CIRCULATED TO STIMULATE DISCUSSION AND CRITICAL COMMENT. THE VIEWS EXPRESSED ARE THOSE OF THE INDIVIDUAL AUTHORS. WHILE BRIEFS BENEFIT FROM ACTIVE UHERO DISCUSSION, THEY HAVE NOT UNDERGONE FORMAL ACADEMIC PEER REVIEW.

By Robert D. Ebel and James Mak

Covid-19 has accelerated the growth of teleworking/telecommuting in the U.S. As a result, states are having to confront the challenge of determining how best to tax the incomes of employees who live in one state but work remotely for employers located in another state. In Hawaii a resident is taxed on income from all sources (some of that may be taxed by other tax jurisdictions as well) while the nonresident is taxed on income from Hawaii sources only. To avoid double-taxation, 41 states and the District of Columbia that have a broad based personal income tax allow income taxes paid to another state to be credited against income tax liabilities in their home state. For nonresident filers, calculation of Hawaii sourced income is based on the number of days an employee is physically present in Hawaii.

Facebook
Twitter

1 thought on “Taxing Income in the New World of Teleworking”

  1. Nice paper.
    Any thoughts about the wisdom of sourcing services according to place of consumption, as opposed to place of performance, for purposes of the GET?

Leave a Comment

Your email address will not be published. Required fields are marked *

The University of Hawaii Economic Research Organization (UHERO) welcomes online comments to stories that are posted on our website or social media pages. Comments are intended to be a forum for open, respectful, and family-friendly discussion. UHERO reserves the right to remove anything posted on our website or social media pages that is deemed inappropriate. All comments are moderated and will therefore have a delayed post time.
Some guidelines (not an exhaustive list) we use when moderating/approving comments include:

  • Do not bully, intimidate, or harass any user.
  • Do not post content that is hateful, threatening or wildly off-topic; or do anything unlawful, malicious, discriminatory or defamatory.
  • Observe confidentiality laws at all times.
  • Do not post spam or advertisements.
  • Observe fair use, copyright and disclosure laws.
  • Do not use vulgar language or profanity.

UHERO may amend this policy from time to time.