Multi-State Nexus & Reciprocity Flashcards
7 cards from real CPM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Multi-State Nexus & Reciprocity flashcards as text
Under the Interstate Wage Payment Simplification Act concept, SUI is assigned to one state to avoid:
Answer: Multiple-state unemployment tax obligations on the same wages
The FUTA multi-state rules are designed so that SUI wages are credited to one state only, preventing the same wages from being taxed by more than one state's unemployment fund.
A remote employee lives in a state with no state income tax (e.g., Texas) but works for a company headquartered in a state that has a 'convenience rule' (e.g., New York). Which state may tax the remote wages?
Answer: New York, if the remote arrangement is for the employee's convenience
New York's convenience rule can source remote work to New York when the remote arrangement is for the employee's convenience, creating a New York withholding obligation even for Texas residents.
Which federal law prohibits states from imposing income tax on certain railroad and airline employees based solely on the employee working in that state?
Answer: The Tax Equity and Fiscal Responsibility Act
TEFRA and related federal statutes place limitations on state taxation of certain interstate transportation workers, including railroad and airline crews.
A new employee presents a reciprocity exemption certificate but the work state's reciprocity agreement was terminated last year. The correct action is to:
Answer: Reject the certificate and begin withholding for the work state immediately
If a reciprocity agreement no longer exists, the exemption certificate is invalid and the employer must withhold for the work state.
For SUI purposes, which factor is used only if an employee's services cannot be assigned under any of the first three FUTA factors?
Answer: The state of the employee's domicile (residence)
The employee's state of domicile is the fourth and final tiebreaker under the FUTA localization rules when no prior factor can assign the wages to a single state.
An employee earns $80,000 working in State X (no reciprocity with home state) and $20,000 working in their home State Y. State X taxes the $80,000 at 5%. State Y taxes total income at 6% but allows a credit for taxes paid to State X. What is the approximate net State Y tax owed?
Answer: $2,000 ($6,000 − $4,000 credit)
State Y taxes the full $100,000 at 6% ($6,000) but allows a credit of $4,000 (5% × $80,000 paid to State X), leaving a net State Y liability of $2,000.
Which of the following scenarios would most likely NOT create payroll withholding nexus in a state?
Answer: A salesperson makes a single one-day sales call in the state
Many states have de minimis safe harbors for very brief visits; a single one-day sales call may fall below threshold, whereas longer assignments, relocation, or training typically establish nexus.