1. Determine Need for Registration by checking the SOS Website (Corporations Division usually)
   • Even one remote worker can trigger a requirement.
   • Check the state’s legal definition of “doing business” (often found on the Secretary of State’s website).
2. File a Certificate of Authority or Foreign Registration
   • Each state will have its own form or process (often found on the Secretary of State website).
   • You’ll generally be asked to provide a Certificate of Good Standing from your home state.
3. Obtain a Registered Agent:
   • A registered agent is required to receive official state documents, including service of process in legal matters.
   • RAs should not cost more than $200/year
4. Pay Required Fees to the State
   • Initial registration fees typically range from $50 to several hundred dollars, depending on the state.
5. Maintain Good Standing:
   • File annual or biennial reports, and pay associated fees. The RA can likely do this on your behalf from our experiences. 
   • Update your registered agent or business address if they change.

Types of Nexus to Consider

1. Income Tax Nexus:
   • Typically triggered when you have an employee in the state or if you have a certain level of sales or revenue in that state.
   • You might need to file a corporate income tax return, even if your main business operations are elsewhere.
   • If you are an LLC or S Corp for tax purposes, NOTE - this will also create PERSONAL income tax nexus in many cases.  Expect State K1s to flow to your personal return.
     • This can be burdonsome but will NOT increase your effective tax rates. 
2. Sales Tax Nexus (Economic Sales Tax Nexus):
   • States increasingly adopt economic nexus thresholds (e.g., $100,000 in sales or 200 transactions annually).
   • Having an employee who handles sales in the state can also create physical nexus.  However, this is very nuances and at Anomaly, we recommend certain sales tax consultants to consult on the facts and circumstances. 
3. Payroll Tax Nexus (see below)
   • If an individual is performing services in a state, you must register with that state’s department of revenue or labor to withhold and remit payroll taxes.

1. Income Tax Withholding 
   • You must register with the Department of Revenue to receive a State Tax Withholding ID number.  This is NOT the same as the SOS registration above!
   • Work State vs. Residence State: Typically, you withhold taxes for the state where the work is performed. However, if there is a reciprocal agreement between the two states, you may only need to withhold for the employee’s residence state.
   • Multiple State Allocations: If an employee splits time between states, you may need to allocate wages accordingly.
2. Local (City/County) Taxes:
   • Some states have local wage or occupational taxes (certain cities in Pennsylvania, Ohio as examples). Confirm if local taxes apply to your employee’s location.
3. Unemployment Insurance (UI) Taxes:
   • Generally paid to the work state.
   • SUI (State Unemployment Insurance) Rates: Each state sets different UI rates; you’ll need to keep track and remit accordingly.
   • You will need to register for UI accounts and provide the ID numbers to your payroll company!
4. Payroll Frequency Requirements:
   • Pay frequency (weekly, bi-weekly, etc.) can be governed by state law. Make sure your pay schedule complies.
   • If your company schedule does NOT apply, you may need to have special payrolls. 

1. Paid Sick Leave/Family Leave:
   • An increasing number of states and municipalities mandate paid sick leave.
   • States like California, New York, and New Jersey also have paid family and medical leave laws, with required employer contributions and payroll withholdings.
   • If you miss these requirements, especially in NY, you will be fined. 
2. Workers’ Compensation Insurance:
   • Required in almost every state, but coverage rules and rates differ.
   • Some states have a monopolistic state fund (ex North Dakota, Ohio, Washington, Wyoming).
3. Final Pay and Termination Differences:
   • States vary on how quickly terminated employees must be paid final wages.
   • Some require immediate payment, others allow the next regular pay cycle.
4. Anti-Discrimination and Harassment Training:
   • States like California have specific training requirements for supervisors and employees.
   • Posting requirements (ex anti-discrimination notices) may also differ.

1. State Mandated Disability or Paid Leave Programs:
   • States like New York, Rhode Island, and California require employers to participate in state disability insurance or paid family leave programs.
2. Health Insurance Market Differences:
   • Insurance carriers and plan options can vary dramatically by state.
   • If you offer a group health plan, ensure providers in the new state are in-network.
3. Retirement Plan Requirements:
   • Some states (ex California, Oregon, Illinois) have state-run retirement programs that mandate employer enrollment if you don’t offer a qualified retirement plan.
4. Continuation of Coverage (Mini-COBRA Laws):
   • Federal COBRA generally applies to employers with 20+ employees, but some states have “mini-COBRA” laws that apply to smaller employers or extend coverage for longer periods.

Quick Checklist to Get Started

1. Confirm Nexus before Hiring: Evaluate each state’s nexus thresholds to determine tax and registration obligations.
2. Obtain Required Registrations: File for foreign qualification and secure local licenses or permits.
3. Set Up State Tax Accounts: Handle payroll withholding, UI taxes, and any applicable local levies. Contact your payroll company EARLY as these can take weeks!
4. Adapt HR Policies & Handbook Changes: Address wage, hour, leave, and workers’ comp rules for each state.
5. Review Benefits: Confirm healthcare, disability, and retirement obligations in each region.
6. Monitor Changes: Stay up-to-date with state and federal law changes that could affect your obligations.