When did a Louisiana employer have to withhold Louisiana income tax from resident and nonresident employees working in multiple states?

Plain-English summary

A Louisiana employer had to withhold on wages attributable to any services performed in Louisiana, regardless of the employee's residence or how few hours were worked in the state. The ruling said no de minimis withholding rule existed.

For Louisiana residents working elsewhere, the statute also required Louisiana withholding. But the Department said it would not penalize an employer that withheld the other state's income tax on those wages. That no-penalty practice did not apply when the work state had no income tax, such as Texas or Florida.

The employer's workforce

A Louisiana franchisor hired employees living in several states. New hires spent four to six weeks training and working at Louisiana locations, then traveled among franchise locations in assigned multistate territories.

The employees consulted with franchise owners and managers, while control came from the Louisiana corporate office. They did not make sales or collect money and were paid annual salaries.

Nonresidents working in Louisiana

La. R.S. 47:111(C) included a Louisiana nonresident who performed services in the state for wages. La. R.S. 47:112(A) required employers to withhold from wages.

Company A therefore had to withhold Louisiana tax for every employee's four-to-six-week Louisiana training period. After training, a nonresident who performed no more Louisiana services did not require Louisiana withholding.

If a nonresident worked partly inside and partly outside Louisiana, withholding applied only to wages for Louisiana services. The ruling emphasized that the number of Louisiana hours did not matter because there was no de minimis rule.

Louisiana residents working in other states

The statutory employee definition also covered Louisiana residents performing services outside the state. The ruling therefore said the employer should withhold Louisiana tax on resident wages for work inside Louisiana and in another state that imposed no income tax.

The Department described an administrative exception to penalties: when a Louisiana resident worked in another income-tax state and the employer withheld that state's tax, the Department would not penalize the employer for failing to withhold Louisiana tax on those wages. The ruling explained that the resident could generally claim a Louisiana credit for tax paid to the other state and would owe little, if any, Louisiana tax on that income.

If the work state had no income tax—Texas and Florida were the ruling's examples—the employer could be penalized for not withholding Louisiana tax.

What this means for you

Multistate employers

Track where services are physically performed. A Louisiana headquarters or out-of-state residence did not replace the work-location analysis.

Payroll departments

Do not assume a brief Louisiana training period is too short to trigger withholding. This ruling expressly rejected a de minimis threshold.

Louisiana-resident employees

Out-of-state work required separate attention to the work state's tax and the Louisiana resident rules. The ruling's no-penalty practice depended on actual withholding for the other income-tax state.

Common questions

Q: Did nonresident trainees require Louisiana withholding?

A: Yes, for wages attributable to their four to six weeks of Louisiana training and work.

Q: Was there a minimum number of Louisiana work hours?

A: No. The ruling said no de minimis withholding rule existed.

Q: After training, did a nonresident working entirely outside Louisiana require Louisiana withholding?

A: No, under the facts stated.

Q: What if a Louisiana resident worked in another state with an income tax?

A: The Department said it would not penalize the employer for failing to withhold Louisiana tax if the employer withheld the work state's income tax.

Q: What if the other state had no income tax?

A: The ruling said Louisiana withholding was required and named Texas and Florida as examples.

Citations and references

• La. R.S. 47:112(A) — employer duty to withhold from wages
• La. R.S. 47:111(C) — resident and nonresident employee definition for withholding
• LAC 61:III.101.C — Revenue Ruling authority and reliance statement

Source

• Landing page: Louisiana Department of Revenue Policies
• Original PDF: LA Revenue Ruling 08-004

Original ruling text

Revenue Ruling No. 08-004
February 6, 2008
Withholding Tax
When Does an Employer Have to Withhold Louisiana Income Taxes from Employees
Purpose
The purpose of this Revenue Ruling is to address when an employer, who is a Louisiana business, is
obligated to withhold Louisiana income taxes from its employees. Below is a fact pattern that illustrates
the different withholding situations that a Louisiana-based employer might encounter. After the
statement of facts, this ruling will address common withholding questions that arise from the facts
concerning different types of employees.
Statement of Facts
Company A is a Louisiana-based franchisor. The system has over 300 franchised locations in more than
half the states. The company’s corporate location is in New Orleans, LA. Company A employs several
team members who reside in states other than Louisiana. When hired, team members report to Louisiana
for four to six weeks for orientation and training. Team members work as part of the staff at Company
A’s corporate store in New Orleans for a number of weeks and additional training takes place at other
Louisiana locations. Once the four to six weeks of training is over, team members visit franchised
locations within a selected territory consisting of the employee’s resident state as well as other states.
The team members consult with the owner/manager of each franchised location to discuss adherence to
the system and offer suggestions for operations. All direction and control for the franchised locations
comes from the corporate office in Louisiana. Team members do not engage in any sales transactions
and no money is collected by the team members. Team members are paid an annual salary for work
performed and no direct income is generated from their visits to their assigned stores.
Discussion
Revised Statutes 47:112(A) states that every employer making a payment of wages to an employee shall
deduct and withhold a tax from those wages as provided for by withholding tables as promulgated by the
Secretary of the Department or Revenue. R.S. 47:111(C) defines employee as a resident or nonresident
individual of Louisiana who performs any service in the state for wages or any resident of Louisiana
who performs any services outside of the state for wages. For example, if a nonresident employee
performs services in Louisiana, the withholding tax shall be deducted and withheld from all wages paid
with regard to those services. If a nonresident employee performs services partly within and partly
without the State, only wages for services within the State are subject to withholding. While the statute
requires an employer to withhold income taxes on services provided by a Louisiana resident either in or
out of Louisiana, the Department does not penalize an employer for failure to withhold on a Louisiana
resident for services performed in another state so long as income taxes are withheld for the state in
which the services are performed. The reason for this practice is that Louisiana allows an income tax
credit to its residents for taxes paid to another state. The employee therefore effectively will receive a
credit against the Louisiana income tax on the out of state income and will ultimately owe little, if any,
Louisiana tax on that income. If instead the employee is a Louisiana resident and working in a state that
does not have an income tax, like Texas or Florida, the employer will be penalized for failure to
withhold Louisiana income taxes on the income earned from services performed in the other state.

Revenue Ruling No. 08-004
Page 2
February 6, 2008
Ruling
Based on the facts given in the situation above, Company A should withhold on all team members,
regardless of their state of residence, for the 4-6 weeks that they are trained in Louisiana. After the 4-6
weeks of training, Company A is not required to withhold income taxes on team members who are not
residents of and do not perform any additional services in Louisiana. Company A should continue to
withhold income taxes on wages for services perform in Louisiana regardless of the state of residency
and regardless of the number of hours an employee worked in Louisiana. No de minimus withholding
rule exists. Lastly, Company A should withhold income taxes on the wages of Louisiana residents for
the performance of services in Louisiana and for the performance of services in other states so long as
that state does not have an income tax. If a team member is a Louisiana resident and working in another
state, the employer will not be penalized for failure to withhold Louisiana income taxes on wages earned
in another state so long as the employer has withheld income taxes for the state in which the services are
performed.

Cynthia Bridges
Secretary

A Revenue Ruling is issued under the authority of LAC 61III.101.C. A Revenue Ruling is written to provide guidance to the
public and to Department of Revenue employees. It is a written statement issued to apply principles of law to a specific set of
facts. A Revenue Ruling does not have the force and effect of law and is not binding on the public. It is a statement of the
department's position and is binding on the department until superseded or modified by a subsequent change in statute,
regulation, declaratory ruling, or court decision.