This week’s question comes from Angela, an office manager. We tested our multi-state employees for unemployment purposes based on Localization of Services. For some employees we were able to determine the appropriate state, but for some we weren’t. Now we need to test based on Base of Operations. What is Base of Operations? Answer: The general rule for employees who work in more than one state is that employees should be covered by only one state to prevent employers from paying tax in two or more states for the same employee. To determine which state, employers should look at four factors, in the following order:
- Localization of Services
- Base of Operations
- Place of Direction or Control
- Place of Residence
The employee is covered by the state under which that employee first qualifies using these factors. For example, if an employee is determined to be covered by a state under the Localization of Services test, the results of the remaining tests are irrelevant. Only if a determination cannot be made under the Localization of Services test does the employer consider the Base of Operations.
For the Base of Operations test, determine if the employee performs some services in the state that is the base of operations for that employee. The base of operations is where the employee starts work, goes to receive instructions from the employer, replenishes supplies, maintains records, etc. Not all employees necessarily have a base of operations. If the employee performs some services in the state that is the base of operations for that employee, that state is the state where the employee will be covered. If not, go to the Place of Direction or Control test.
Contact Vision Payroll if you have further questions.