Since "sell to cover" means you acquire and sell on the same day then if you have a gain it's certainly short term.
But, do you REALLY have a gain? I'd doubt it.
Your basis in the stock acquired, stated as a "per share" figure, is the same per share "fair market value" used by your employer to calculate the compensation created by the vesting of the gross number of shares in the grant. Accordingly, a "same day" sale, while it CAN result in a gain, most commonly results in a small loss due to selling commissions and fees.
One way or the other you've got to pay the withholding taxes associated with the compensation and there's really no "tax" answer to your question of "Is it more benficial to pay out of pocket to cover taxes on rsu vesting date?" You pay the taxes with after tax money you have or you pay the taxes by giving up shares (also "after tax").
Your situation here is exactly like that of any other investor: do you hold onto the stock and use your out of pocket cash for the taxes? If the stock goes on a tear upward and you hold, you're a genius, if it tanks, you're not. But those aren't "tax" questions.
Tom Young
