45 Ind. Admin. Code 3.1-1-98
Authority: IC 6-8.1-3-3
Affected: IC 6-3-4
Sec. 98.
Withholding of Compensation Paid To Employees of Interstate Transportation Companies. The following policy prescribed by the Department applies to the withholding of state income tax on transportation companies including railroads, motor carriers, airlines, and water carriers on compensation paid to their employees who work in more than one state.
Transportation companies who employ Indiana residents in this State will continue to withhold the Indiana Adjusted Gross Income Tax as prescribed under Section 408 of the Indiana Adjusted Gross Income Tax Act of 1963, as amended. In the event that the Indiana resident earns more than 50% of his compensation outside of Indiana the employer, under Public Law 91-569, is required to withhold the tax for the state in which more than 50% of the compensation is earned; however, if more than 50% of the compensation is not earned in any state, the employer must withhold on the basis of residency. If tax is withheld on an Indiana resident and remitted to a state other than Indiana, the employer must file an annual information return reporting any wages on those Indiana residents subject to the withholding provisions of another state.
It is the opinion of this Department that the 50% test prescribed under this Federal Act does not apply to Indiana residents employed by a railroad, motor carrier, airline or water carrier in the States of Georgia, Illinois, Kentucky, Michigan, Mississippi, North Carolina, Ohio and Wisconsin. Since Indiana has reciprocal tax agreements with the above states for transportation company employees, any tax assessed on an Indiana transportation employee other than Indiana adjusted gross income tax would be inoperative as a result of these agreements. Nonresident transportation employees who are employed in Indiana and receive more than 50% of their compensation for services performed in this state, are subject to the withholding of the Indiana adjusted gross income tax; however, if the employees subject to Public Law 91-569 are residents of Georgia, Illinois, Kentucky, Michigan, Mississippi, North Carolina, Ohio or Wisconsin, these nonresident employees are not subject to the withholding tax provisions in accordance with the previously mentioned reciprocal agreements. Nonresident employees who are residents of those states having a reciprocal agreement with Indiana should file a certificate of residency with the employer, and the employer should withhold on the basis of residency.
Information returns are required to be submitted by the transportation company to the state of residency of those employees subject to withholding tax as a nonresident employee.
In determining whether more than 50% is earned in the state of employment, the measurement in determining compensation on the various workers is as follows:
Railroad employees assigned to track borne vehicles = Mileage traveled in a state
Maintenance and terminal employees = Time worked in a state
Motor Carrier employees operating vehicle = Mileage traveled in a state
Employees operating a water carrier = Time worked in a state
Employees operating an aircraft = Scheduled flight time
45 IAC 3.1-1-98