Tax Issues for Virtual Employees

[Michael Gayer Jr]

Aloha from Hawaii,

I own a RENTAL Inspection business in Hawaii.  I work primarily with Property Managers.  It takes a long time to do our  forms and paperwork (preparing and formatting).  I'd like to hire a Virtual Employee (not contractor) for these tasks.  I know someone that could do it but he lives in Kentucky/Tenessee.  

I sent him and I-9 and W-4.  He says his state does not have State Taxes.  

What tax issues do I need to be aware of with this?

Thank you in advance,

Mike