When an employee performs services in Montana and another state(s), it can be difficult to determine where the wages should be reported for UI tax purposes. A four part test was designed to be used by all states to help make that determination. These tests: 1) simplify reporting of wages by the employer; and 2) avoid dividing the employee’s wages among the states where the employee worked (for ease in claim filing).
The employee must perform some service in Montana before the tests can be
applied. The tests are applied to the employee (not the employer)
in the following order:
1) Localization. This refers to where the services are performed. The services are localized within Montana and reportable to Montana when:
|The services are performed entirely within Montana.|
|Most of the services are performed in Montana and individuals work outside the state only at minor or temporary tasks.|
|Some factors to consider when determining if the services of the worker are minor or temporary are:|
|The employment relationship between the employer and employee, particularly the intention of the employer with respect to the individual’s present and future employment status.|
|Whether it is intended by the employer and the employee that those services performed in another state are isolated transactions or a regular part of the employee’s work.|
|Whether the agreement provides that the employee will return to the original state or will continue to work in other states.|
|Whether the assignment is temporary and of predetermined short duration with no change of residence. If a temporary assignment extends over a considerable period of time to the point it appears to be a permanent assignment, the state the wages are reported to should be re-evaluated.|
2) Base of Operations. If an individual’s service is not localized in any state, it is necessary to apply a second test to determine the state where wages should be reported.
|Does the individual perform some services in the state where he or she has a base of operation? The base of operation is a fixed center, of a more or less permanent nature, from where the employee starts work and to where the employee customarily returns to receive instructions from the employer, or communications from customers or other persons, or to replenish stock and materials, to repair equipment or to perform any other functions necessary to his or her trade or profession.|
|If the employee performs services in the state where the employee has a base of operation, all wages, including wages earned in other states, is reportable to the state with the base of operations.|
3) Place of Direction and Control. If the employee has no base of operations, or has a base but does not perform any service in the state where the base is located, or if the base of operations moves from state to state, it is necessary to determine if any of the individual's services are performed in the state where the employee's services are directed or controlled.
|The place where an individual’s services are directed or controlled is the place where basic authority resides and where general control originates, rather than the place where a manager or foreman may directly supervises the services. If services are performed in the state where general control is held, the services are reportable to that state.|
4) Residence of Employee. If none of the other tests apply, all of the individual's services are reportable to the state where the employee lives, provided some of the employee's services are performed in that state.
The flow chart on the following page will assist you in determining the proper state to report your multi-state employees. If you have any doubt as to where wages and employment should be reported, please contact a Field Representative or our Helena office.
When employees work in more than one state, to which state are the wages reportable? Please refer to this flowchart and further explanation on the previous page.