State Court Throws Contract Workers Into Upheaval

State Court Throws Contract Workers Into Upheaval

With the Dynamex decision, the California Supreme Court created new, unlegislated law with respect to the use of independent contractors; many companies continue to seek advice on how to mitigate the impact of that case.
Dynamex, adjudicated in favor of California tax collectors, has implications on the state’s growing gig economy — think Uber and other tech-based services — as well as many multistate enterprises. Both industries rely heavily on independent contractors.
Employers must now evaluate whether to reclassify contractors as employees to avoid significant fines or restructure their organizations to minimize these rules.
For example, if a California based company employs 150 workers and half aren’t in the state, bifurcation of the non-California activity or business should be evaluated to obtain legal certainty as to classification for those independent contractors.

But Dynamex isn’t the only recent tax related event — many of which are giving companies reason to seek advice on how to leave California. As the current state legislature continues to discuss new and creative taxes, business owners and CEOs are increasingly evaluating the benefits of moving to a state with lower taxes — or none at all — and fewer regulations.
New state tax proposals seek to tax services (SB 993), create a single payer healthcare system (SB 562), impose a 10% business tax on net income (Assembly Constitutional Amendment 22), and increase property taxes (split roll legislation) to name a few. The California Tax Foundation estimates more than $6.2 billion in new taxes and fees are being considered.
Nine states have no or nearly no state income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.
Accountancies for decades, including RJI CPAs, have helped business owners with tax planning and migrating businesses to other states — before, during, and after a move.

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