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Taxation for On-site Employees

Most employees who work on-site at a company office pay taxes to the state where the office is located. Those who commute from another state to the office may have the opportunity to instead pay taxes in their home state if both states have a reciprocal agreement in place.

  • In most cases, employees and employers are subject to taxation in the state where the employee physically performs work. Employees who live and work in the same state as their employer are taxed in that state.
  • Employees who commute to another state to work at one of the designated company office locations may also be taxed in the state where they live, unless their work state has a reciprocal agreement with their home state. In the latter case, the employee can submit a Certificate of Non-residency to the state where they work (usually, the state where the office is located) and be taxed solely in their home state.

Work locations also determine:

  • the states where an employer must register with state tax agencies to withhold and pay payroll taxes for remote employees.
  • which state labor agencies should be notified when a new employee is hired for that location.

The information on this page is intended as general guidance. State requirements for withholding vary, and the liability for a specific employee will depend on their unique circumstances. Zenefits does not provide tax advice, and urges administrators and employees to consult a tax advisor when determining where an employee should pay taxes.