We Defer: Telecommuting Tax Nightmares

In preparing to telework my organization has began to look at the employer’s tax liability. Unfortunately this seems to be a major hang up for telework, and one that the states cannot seem to agree on. So far each state has defered to the other and the payroll company defers to the tax advisor and the tax advisor defers to the payroll company. If anyone could please advise or point us towards some resources that would be great!

Here is the situation.

Employer is a VA Corp.

Employee is a South Carolina Resident who will be working for the VA Corp while telecommuting from OH.

Questions:

A) Which state should income tax be withheld in?

B) Which state should the employer pay into the State Unemployment Insurance System?