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Canadian Company hiring Employees in TX, PA and IL

edited January 2011 in International Issues
Hi All,

This is my first post on this forum so excuse me if I forget to follow any norm.

We are a Canadian Company and 3 months back, for the first time in its history, we hired an employee based in US (state of TX).
It was my first encounter with US payroll laws and after an extensive research, i somehow managed to sail through the payroll processing of this employee.

So far:
I have registered our business with IRS and obtained EIN.
I have processed few payrolls for this employee and remitted the withheld taxes using EFTPS.

Now we have hired 2 more employees. one in PA and other in IL.
I read somewhere on this website that both these states impose State income taxes, and we need to register our business with the concerned state if we employ a person resident in these states. My first question is, is this true? Are we actually required to register our business with the states of PA and IL? Is the registeration with IRS (EIN) alone not sufficient, like in the state of TX?

I may have more questions but thought would not confuse you guys any further.




  • PA is still a flat rate of 3.07% of taxable wages for withholding. In PA, of course, you also have to at least consider local and school district taxes.

    OP, where does the employee work and where does he live in PA?
  • Thank you David and Patty ! Much Appreciated !

    I also initially thought of giving this task to a third party payroll processing organization like Ceridian. But having done TX witholding for about 3 months, gave me some comfort and i started to think that I can mange with other 2 reps as well. However based on my further research and your replies, it looks little more complicated than i thought.

    As for the location of PA employee:- He lives in Mount Pleasant, PA and he will work as our Sales Rep in the Easter US states. I hope this doesnt make him an employee in more than one states.

    Let me talk to some payroll processing firms and get back to you. Do you guys recommend any such firm?

    Thans once again.

  • rrupertrrupert ✭✭✭
    one other note...although TX doesn't have income tax, they still have state unemployment taxes. Did you register with the state? If not you must do so and will owe taxes from the first payroll period onward. The place you need to register is the Texas Workforce Commission.

    That said, I agree with David that you ought to consider a PEO. I hesitate to recommend any specific one becuase I have only had a relationship with one and would not recommend them. They are the employer of record and take care of all payroll/taxes/benefits/workers compensation insurance/etc. And they will be able to do it much more efficiently than you trying to do it from Canada with one employee here and one there. You will pay an upcharge for it, but it will be worth not having the liability (or as much anyway).
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