Key Takeaways
- Learn how hiring Georgia-based remote workers can create a tax nexus for your business.
- Discover the corporate, sales, and payroll tax obligations that come with establishing nexus in Georgia.
- Get practical guidance on staying compliant and avoiding costly penalties when managing remote teams.
Is Your Remote Workforce Quietly Creating a Tax Bill in Georgia?
The rise of remote work has blurred traditional state tax boundaries. Businesses can now hire top talent anywhere, but with that flexibility comes tax complications. Where your employees live and work can determine whether you’ve created a taxable presence in another state.
Georgia is a hotspot for remote workers. Its lower cost of living makes it attractive for a skilled workforce, and tempting for employers to recruit talent from the state. Is your business making use of Georgia-based employees? If so, proceed with caution. Even one worker in Georgia can trigger nexus rules, payroll obligations, and compliance requirements.
This blog will walk you through how Georgia defines nexus for remote workers, the risks of creating an unintentional taxable presence, and the steps your business can take to stay compliant.
What Is Tax Nexus?
A tax nexus is the connection between your business and a state that creates tax obligations there. This relationship typically means you must file returns, withhold taxes, and report income, even if your headquarters is in another state.
The Main Types of Nexus
- Physical Nexus. Triggered when your business has a physical presence in a state, such as an office, warehouse, or employees.
- Economic Nexus. Based on sales activity. If you generate enough revenue or transactions in a state, you may owe taxes there even without a physical presence.
- Payroll/Employee Nexus. Established when your employees live or work in a state. Even a single remote worker can trigger payroll tax and income tax withholding obligations.
What Creates Nexus in Georgia?
For Georgia, the rules are clear: if you employ remote workers, the following scenarios can create nexus for your business in Georgia:
- Core business functions performed in Georgia. If a Georgia-based employee manages sales, client accounts, or administrative operations, their work ties your business to the state.
- A home office based in Georgia. An employee’s Georgia home office can be considered your company’s “place of business,” even if you don’t maintain a formal office in the state.
This means that hiring even one Georgia-based remote worker can instantly expand your compliance responsibilities. You may need to:
- Register with the Georgia Department of Revenue.
- Withhold Georgia state income taxes from that employee’s wages.
- Comply with state unemployment insurance requirements.
- File Georgia corporate income or net worth tax returns.
The only narrow exception comes from Public Law 86-272. If your Georgia employee’s role is limited only to soliciting orders for tangible goods, and those orders are approved and shipped from outside Georgia, your company may be exempt from Georgia’s corporate income tax.
However:
- You still have to file a Georgia return and pay the net worth tax.
- If the employee does anything beyond sales solicitation – like customer service, account management, or admin; the exemption no longer applies.
Business and Tax Implications
Once nexus is triggered, the impact goes well beyond registering with tax authorities. Your business may face multiple obligations, each with its own rules:
- Corporate Income Tax. Nexus may require filing Georgia corporate income or net worth tax returns.
- Sales Tax. Selling into Georgia, combined with having an employee there, strengthens the state’s claim that you owe sales tax.
- Payroll Taxes. As an employer, you must withhold Georgia income tax and contribute to state unemployment insurance.
- Penalties and Risks of Non-Compliance. Failing to meet these obligations can lead to back taxes and penalties.
Best Practices for Businesses
Building compliance into your hiring and payroll processes can help you stay ahead of Georgia’s rules:
- Conduct a nexus review whenever hiring. In Georgia, even a single remote worker can create a nexus. Before onboarding, confirm whether you need to register with the Georgia Department of Revenue for withholding and with the Department of Labor for unemployment insurance.
- Classify workers correctly. Misclassifying employees as contractors can leave your business liable for back taxes and penalties. Keep clear documentation of where employees work and what roles they perform.
- Keep registrations up to date. Open the right accounts when employees are hired in Georgia, and update them promptly if those employees leave. Regularly reviewing registrations helps to prevent incorrect state payments, which leads to administrative issues later.
- Consult the experts before expanding. Multi-state rules are complex. Work with a CPA who understands both state and federal tax laws before adding remote team members.
At Fusion, our CPAs help businesses stay ahead of these challenges. From nexus reviews to multi-state compliance, we guide you through the risks so you can focus on growth.
Frequently Asked Questions
1. Does hiring just one remote employee in Georgia create tax obligations for my business?
Yes. According to the Georgia Department of Revenue, having even a single employee working in Georgia creates nexus. That means your business may need to register with the state, withhold income tax from wages, and comply with unemployment insurance requirements.
2. Are there any exceptions to Georgia’s nexus rules for remote employees?
The only narrow exception comes from Public Law 86-272, which protects companies that only solicit orders for tangible goods that are approved and shipped from outside Georgia. However, this does not cover services, and it does not exempt you from Georgia’s net worth tax filing requirement.
3. What steps should my business take if we hire a Georgia-based remote worker?
You should register with the Georgia Department of Revenue for payroll withholding, set up unemployment insurance accounts with the Department of Labor, and review whether corporate income or net worth tax filings are required. Consulting a CPA experienced in multi-state compliance can help ensure you meet all requirements.
____________________________________________________
This blog article is not intended to be the rendering of legal, accounting, tax advice, or other professional services. We base articles on current or proposed tax rules at the time of writing and do not update older posts for tax rule changes. We expressly disclaim all liability regarding actions taken or not taken based on the contents of this blog as well as the use or interpretation of this information. Information provided on this website is not all-inclusive and such information should not be relied upon as being all-inclusive.