A North Dakota or Michigan resident who works in Minnesota and does not want Minnesota income tax withheld from his or her wages must complete and give to the employer Form MWR, Reciprocity Exemption/Affidavit of Residency. The employer must retain one copy for his or her records and forward one copy to the Minnesota Department of Revenue. Form MWR should be completed by the employee each year by February 28 or within 30 days after they begin working or they change their residence. The employer must send a copy of Form MWR to the Minnesota Department of Revenue no later than March 31 each year, or within thirty days after a hire of a new employee, an employee changes his or her residence, when the employee submits the form to the employer. Employees of Interstate Carrier Companies Interstate carrier companies that have employees such as truck drivers, bus drivers or railroad workers who regularly perform assigned duties in more than one state should withhold income tax for the employee’s state of residence only. Interstate air carrier companies who have employees who perform regularly assigned duties on aircraft in more than one state are required to withhold for their state of residence as well as any state in which more than 50 percent of their compensation is earned. An employee is considered to have earned more than 50 percent of their compensation in any state in which scheduled flight time in that state is more than 50 percent of total scheduled flight time for the calendar year. Tax on Nonresident Entertainment Entities Nonresident entertainers such as musicians, actors, dancers, athletes and public speakers may be subject to a two percent tax on the gross compensation they receive for entertainment performed in Minnesota. The tax is imposed on the entertainment entity. The person who has legal control of the payment of the compensation is responsible for withholding and depositing the tax. This tax does not apply to residents of North Dakota or Michigan if the individual provided a properly completed Form MWR, reciprocity exemption/affidavit of residency. More information is available at Nonresident Entertainer Tax. Minnesota Residents Employed Outside Minnesota In Other States. An employer of a Minnesota resident who does not work in Minnesota but works in another state and who withholds federal income tax from the wages of that employee may also be required to withhold Minnesota income tax. The employer may be required to withhold taxes in the state in which the work is being performed and Minnesota if the company in the other state has Minnesota nexus. The term nexus is used in tax law to describe a situation in which a business has a presence in a state and is subject to the state’s jurisdiction to tax. In general, a business has nexus if it derives income from sources within the state, owns or leases property in the state, employs personnel in the state in activities that exceed “mere solicitation”, or has capital or property in the state. Reciprocity agreements apply for the states of North Dakota and Michigan. An employer who is required to withhold both Minnesota income tax and
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