Out-of-state residents commuting to Wisconsin. The Wisconsin Department of Revenue (DOR) uses a physical presence test to determine whether an employee’s income is sourced to Wisconsin, so a nonresident who telecommutes to Wisconsin would be subject to Wisconsin taxation only for the days the employee is present and performs services in the state.
A Wisconsin employer would be required to withhold tax from the telecommuting employee’s pay if the total amount of Wisconsin income is over $1,500 per year.
Wisconsin residents telecommuting out of state. Conversely, the income of an employee who is a resident of Wisconsin and telecommutes to an out-of-state employer would be sourced to Wisconsin.
The DOR may consider that the use of a Wisconsin residence as a home office by a full-time telecommuter is the maintenance of a business location in the state by the employer. This would make an out-of-state employer subject to state corporate income tax. Other considerations in making such a determination include continuous or frequent activity by Wisconsin employees in performance of services, operation of equipment owned or leased by the employer (including computers), and soliciting and taking orders.
To inquire about the tax status of telecommuters, call the DOR at 608-266-2776.
Telecommuting is addressed in contracts with state employee unions. The state Department of Administration has telecommuting guidelines for state workers that address risk and safety issues as well as work assignments and equipment and communication requirements.