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When a consultant starts work for a client in another state, or a developer moves home to a new state, your company may need to register for payroll withholding, unemployment insurance, income tax and sometimes sales tax there. We set up and run multi-state compliance so growth does not create penalties.
Serving United States, Virginia, Washington, DC, Maryland, New York, Texas, California.
What we handle
Staffing, IT consulting and software development companies usually have employees and contractors working in many states at once. Each state where an employee works generally requires a withholding account and a state unemployment insurance account, and wages may be sourced differently between work and resident states. Reciprocity agreements, such as those between Virginia and DC, Maryland, Pennsylvania, West Virginia and Kentucky, and rules such as New York's convenience of the employer test, change the answer for remote workers.
Because staffing and consulting are services, the federal P.L. 86-272 protection for sellers of goods does not apply, so employees working in a state usually create income tax nexus. Some states also tax staffing, data processing or software services, and economic nexus after Wayfair applies to sales tax on SaaS and software. Classification is another major exposure: Section 530 relief is generally not available to technical service firms that place engineers and programmers with clients, under section 1706 of the Tax Reform Act of 1986.
Speak with an advisorWhere we help
Long-term freelancers treated as contractors were held to be common-law employees, entitled to employee benefit plan participation. A warning for permanent contractors in IT.
States can require out-of-state companies to collect sales tax based on economic activity alone, which reaches software and taxable services.
New York's highest court upheld taxing a nonresident on days worked from home out of state for his convenience, the basis of New York's convenience rule.
Removes Section 530 classification safe harbor for technical service firms in three-party arrangements with engineers, programmers and systems analysts.
Our approach
Where every employee and contractor works and lives.
Withholding, unemployment, income tax, sales tax and license accounts.
Payroll, returns and annual filings on a calendar.
Payroll, classification and nexus audits.
Questions
If your question isn't here, call (703) 880-8412 and you'll reach a person.
Generally yes. Most states require a withholding account and unemployment insurance account when an employee works there, even if the company has no office in the state.
Usually. Staffing and IT services are not protected by P.L. 86-272, which covers only solicitation of orders for tangible goods.
In some states. Texas, for example, taxes data processing services, and several states tax temporary help or software. Taxability depends on the state and the service.
Only when they are truly independent businesses. IT staffing firms cannot rely on Section 530 relief for engineers and programmers placed with clients, and states such as New Jersey and California use stricter tests.
Like any employee: withholding follows where they work and live. Wage and work-location changes may also affect the visa filing, so coordinate with immigration counsel.
Often yes, for developing new or improved software that involves technical uncertainty and experimentation. Domestic development costs can also be expensed immediately under section 174A.
Latest updates
Authorized representatives can now make balance-due, amended return, extension, proposed assessment and federal tax deposit payments for business clients online. Appropriate authorization for the client and tax matter is required.
Source: IRS (IR-2026-134)
For 2027 the joint-return standard deduction rises to $33,200, the estate tax basic exclusion to $15,480,000, the annual gift exclusion to $20,000 and the Section 179 expensing limit to $2,640,000. Our advisors recommend revisiting year-end gifting and equipment purchase plans with these figures in mind.
Source: IRS (IR-2026-133)
All 6,576 nominated census tracts, including 2,594 rural tracts eligible for enhanced benefits, become Opportunity Zones on January 1, 2027 for ten years. Investors with capital gains should review the new map before committing funds.
Source: IRS (IR-2026-132)
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