Thanks for your inquiry about this Multi-state scenario, reba1.

I can provide some insights on how to handle this in QuickBooks Online.

When you have employees that live in one state and work in another, they may be subject to income tax in both states. There are states that have reciprocity agreements that would require an employer to only pay income tax to one of the two states. 

On top of these, I recommend consulting the states involve for more tips in handling the payroll taxes and forms.

I've also added this awesome article about multi-state employment payroll situations that I'm sure you'll find helpful. In this article, you'll learn about the different multi-state situations with their reciprocity agreements.

I've got your back if you have more questions about managing your payroll in QBO. Just add your reply in the comment section so I can assist you further. Have a good one.