Nexus and reciprocity examples

Suppose an employee lives and works in Minnesota and also works in North Dakota. Thus, Minnesota is the resident state and North Dakota is the nonresident state. Nexus exists and the employee earns wages in both states. Minnesota and North Dakota have a reciprocal agreement and the employee has completed the North Dakota NDW-R Reciprocity Form. In this example, the STE will not withhold wages in the nonresident state.

Now suppose the exact same scenario EXCEPT the employee has not completed the North Dakota NDW-R Reciprocity Form. Under this scenario, because the Minnesota as the resident state withholds on wages earned out of state and North Dakota as the nonresident state withholds on nonresident wages, the STE will withhold from the employee’s paycheck North Dakota (nonresident) taxes. In this scenario, the employee will have both Minnesota and North Dakota withholding from his or her paycheck.

Finally, let’s reverse the nonresident and resident states so that North Dakota is the resident state and Minnesota is the nonresident state. Nexus exists and the employee earns wages in both states. As we know, North Dakota and Minnesota have reciprocity and the employee this time has completed the Minnesota MWR Reciprocity Form. Because this nonresident certificate is on file, only North Dakota (resident state) withholding will be done.