With the recent vote by city council and verbal support from the Mayor, it seems inevitable that Jersey City will passing a 1% payroll tax on all businesses, regardless of size.
How To Avoid The Tax
1. Hire Jersey City residents. All employees that reside in Jersey City are exempt from the tax, further incentivizing businesses to hire local employees.
2. Move employees to other locations outside Jersey City. The tax is based on where the employee works, not where the Company is headquartered. A Jersey City based company can have locations outside of Jersey City and the workers won't be subject to the tax.
3. Have employees work from home. If an employee works from home, and that is a registered location of the business outside of Jersey City, the employee would not be subject to the tax. While there may be a cost to registering a new business location, it may be less than the payroll tax, especially for a highly paid employee.
4. Hire independent contractors. When classifying someone as an independent contractor, you need to look at several main factors including control, tools and equipment, and whether the person is actually in business for themself.
For control, do you decide when, where and the work is done? If yes then that is the relationship of an employee. Do you provide the tools and the training? Again that is an employee relationship. If the person is in business for themself, meaning they have other clients that is a contractor relationship.
For any questions on how the payroll tax will affect you and any other issues, please reach out to me at jldonenfeld@jldtax.com.