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New York Court Says Telecommuters Must Pay NY Tax
hal9000(jr) writes "The Boston Globe is running this
story on an out-of-state programmer working for a New York company who had to pay state taxes. '"New York has the right to tax 100% of a nonresident employee's income derived from New York sources," according to
the 4-3 decision by Court of Appeals. The court relied on a fairness rule called the "convenience of the employer" under law that says a worker's income is taxable if he chooses to live outside the state, as opposed to if he or
she was transferred there.' The dissenting opinion: 'Judge Robert Smith argued that the basis of the majority's decision that all income is taxable is "that the commissioner says it is ... The majority cites no authority at all, and offers no persuasive reason, in support of this new interpretation."'"
By the same logic, it's for my (and all my coworkers') convenience that the Delaware based media company I work for's main office is in NYC and therefore I should ask NYS for a refund for the past 4 years. This is a dangerous precedent. -Mike
Give me the right to vote, and I'll pay your damn taxes. Till then, up yours. I've got tea, you've got a harbor.
So what if, hypothetically, I live in NY and telecommute to Florida? That should mean that 100% of my income is [i]non[/i]taxible by the state of NY, right?
Or is the rule just "if we want your money, we can take it"?
Irritable, left-wing and possibly humorous bumper stickers and t-shirts
The majority cites no authority at all, and offers no persuasive reason, in support of this new interpretation.
is judicial activism really that surprising anymore?
Evolution is a state-sponsored, state-protected religion.
Topic says it all, and it's not rhetorical. I'm really curious about this.
File under 'M' for 'Manic ranting'
Do these have to pay the same taxes aswell?
why not make it easy and have the same tax rates wether you are in NYC or Alabama, look at all the companies/traitors incorporated in Delaware to avoid paying any tax yet they reap all the benefits of the communities they operate in to the tune of billions (and they have the cheek to call themselves American)
a unified tax would even things out
You said: I live in Texas and work for a company that has an office here, but is headquartered in Massachussettes
I say: thats not what this is about.. he is VPNing and virtually working on assets that reside in NY.
i also say: this is bogus, unless the computer he uses to VPN and do the actual 'work' is in NY too, and his fantastic4 like rubber arms stretch across to hit the keys... he is using the resources of his own state..
.cig
this from the state that raised cigarette taxes then went after people getting them out of state. if the music industry needs to look at its business model, governments need to look at their taxation model - both a looking for all the cash they can get.
always mosh clockwise
I infer (perhaps incorrectly) that you physically performed your job in Portland. Generally, if you earn money outside Oregon, you can apportion your income on your state return. When I lived in Vancouver and worked in Seattle and PDX offices for the same employer, I just looked at days spent in each office.
In this instance, the taxpayer is being taxed by NY for work he did in TN. Based on the court's rationale, the taxpayer need not have ever stepped foot in NY to have 100% of his income subject to NY tax.
I wonder at what point income is not derived from NY? When the employer opens an office with more than one person in the other state? Obviously the threshhold is higher than one. Imagine NY trying to tax the income of every broker in the USA who works for Morgan Stanley, which is (or at least was until 9/11) based out of NY.
He will get taxed the NY Income Tax AND where he is currently located?
I see a case coming before the US Supreme Court. I didn't think the states were supposed to regulate interstate comerce, but IANAL.
Seriously, lets say I am a consultant and have a customer in Greece and I telecommute. The Greek government wants me to pay Greek income tax. The US wants me to pay US income tax. BTW, this is how I read the Greek tax regulations, but again IANAL.
Lets say I am a web hosting provider, does the same thing happen?
The problem I see here is that if you extend this from employees to income in general, you have a major headache on your hands, and in the end many states will lose funds.
Furthermore, how do you define the location where the income is derived? Does physical presence matter? What about a home office that a telecommuter has? How is this different from a one-room office that only holds a server to which the telecommuters connect? Does this mean that I can avoid income taxes by having my data center and only office building in Washington State, but live in Oregon where I don't pay sales tax?
LedgerSMB: Open source Accounting/ERP
He doesn't use NY roads, his kids don't use NY schools, he deosn't get to vote for NY legislators, senators or anything, he doesn't use NY public transport. Why should he pay NY tax?
PS: I am a NY resident myself.
I also think this is going to get appealed to the Federal courts.
I should hope so, this bit got me from the article:
"New York provides the job, New York provides the professional opportunity, and New York should be able to tax that income, even if the employee for his own convenience was working outside of New York state," said Marc Violette, spokesman for state Assistant Solicitor General Julie Mereson, who won the case.
Actually the company provided the job and opportunity and New York had nothing to do with it. As I see it, the employee isn't using NY roads, schools, police or fire services, hospitals, or really any NY public service (which is the reason a state collects taxes, no?), so why should an employee like that have to pay NY state taxes?
Nope, I don't buy into that line at all. If it stands mabye he can send his kids tuition bill to NY marked "payment due"...
It doesn't matter that the state is providing services to the business - the business should be taxed by the state, not the businesses employees
A business pays taxes on it's income. An employee pays taxes on the employee's income. The business gets services from the taxes it pays where it is located. The employee gets services via the taxes the employee pays where the employee is located.
E.G., they are taxing the -employee's- income, not the business income, and since the -employee- receives no services, and it is the employee's income, why should the employee have to pay the taxes?
In your 'business all in one state, employees all in another', the state where the business is would get taxes from the business incomes, the state where the employees live would get the taxes on the employee's income.
The employer will be penalized for not withholding NY state taxes.
When did taxes become a natural law? I thought that taxes were derived from the people of the area where the taxes were used for the purpose of SERVING those paying the tax. It gets kind messy when talking about the Federal Government but it's pretty easy with regards to the States. Especially when one does not reside in the state.
This is just plain wrong. IMO.
LoB
"Anyone who stands out in the middle of a road looks like roadkill to me." --Linus
On the other hand, you have to live in Texas. A state so Republican, it seemed dildos to be illegal.
Why was this even tried in a state court? It's a case of interstate commerce...wouldn't that fall under federal jurisdiction? The fact that the state court didn't dismiss the case outright, to me, shows their bias and/or incompetence. Anybody have any insight into why a state court would hear this case?
Being taxed on his entire salary seems ridiculous to me.
The state in which he is a resident will allow him to deduct the amount of taxes paid to other states.
That would be tax reciprocity... I know some states only have agreements with bordering states and I'm not sure how those agreements work with differing rates in all. The issue here would be that TN has no income tax on regular employment income so what would you be deducting that tax from?
-Mike
With PA and NJ, it's a credit, so I assume that's what he was talking about. However, as someone else pointed out, TN doesn't have state income tax.
Do they have the ability to garner his wages if they are payed by a company in New York through a New York bank? Absolutely. However, in the long run this practice is extremely counterproductive, as it actively encourages their tax base to move elsewhere. Government meltdown occurs when everbody supporting your socialist state goes elsewhere while everybody benefiting from it remains. NYC has been on the brink of that meltdown for years now...
I've abandoned my search for truth; now I'm just looking for some useful delusions.
I've lived in the Delaware/Maryland area all of my life and have had jobs in the opposite state a few times over the years. Because there's no agreement between the states, you basically pay the higher of the two. You file out of state first, paying non-resident rates and you can deduct most or all of that from your home state as a credit. Telecommuting could considered a bit different, but as long you work as an employee, I'm sure they'll want to treat it the same. If the difference between the tax rates is overwhelming maybe become an independent contractor and scare up a few other minor clients (friends and family?) to make it legit.
So, if New York passes a law that says that anyone who's ever watched the ball drop on New Years Eve has to pay NY income tax, then it's not taxation without representation because all such people are free to move to New York?
I hope you see the problem with your statement.
I'd want them to start to have to pay for school, roads, parks, police, etc here in Arizona. That's what your lower-level (as in less than federal) taxes fund. In the case of state taxes it's all state highways, and roads on state lands, the state universities, DPS, and so on. In other words: things I and my community use.
New York helps pay for none of that, regardless of if I work for a company based there or not. Thus, I don't see any possible reason why they need the money. Arizona needs it because living here I use those services. I don't live in NY, they don't need it.
So ya, if they give me the right to vote in state elections, and start sending money back to my state to pay for things, I'll call this fair. Until then, I'm saying it's an issue for federal court.
All this will do is convince companies to move their headquarters outside of NY.
What's interesting is that technically, a LOT of NY companies that maintain "headquarters" in NY are legally headquartered in DE or NV or Bermuda or anywhere else that corporate laws are more favorable. Which makes this case all more interesting. If you extend the courts logic to, let's say a Delaware corporation with operational headquarters in NY, that company's employees should theoretically be paying tax to Delaware, not NY as legally the income came from a Delaware source.
Hopefully the federal courts will take this up as it's their jurisdiction. Although I'm not all that optimistic.
-Mike
How about we abolish income tax.
Absolutely.
Replace it with a sales tax.
No thanks. Why should we pay a tax every single time an item changes hands? If I buy a car, and sell it 5 months later, why should the government get a sales tax twice? Sales tax, like income tax, is too artificial. By artificial I mean it is hindering a free market in a way which causes no benefit to society.
What could be simpler?
Property tax. Just pay taxes on your property (mostly real property but maybe extended to other items if need be). No double, triple, or quadruple taxation there. And you encourage people not to sit on property that they aren't using. Put it to use or sell it to someone who will.
"Taxes are not designed as a direct pay vs. return system"
Hence the problem.
Why yes, I AM a rocket scientist!
You very clearly have no idea what you're talking about. +5 insightful means that apparently the mods are newcomers to the term activist judge as well.
An activist judge is one that, rather than ruling based on local, state, or federal laws, or on the constitution, bases his or her ruling on something else. Usually, this amounts to "because I want it to be so" or "we think it makes us look good." Gay marriage is just one of these cases. So is the taxation case that started this topic. It is not based on local, state, or federal laws, and it is not based on the state/federal constitution.
In the MA case, the judges issued a ruling REQUIRING that the state legislature write a law legalizing gay marriage. This is a very clear violation of separation of powers. The court does not have the right to write laws, any more so than the governor has a right to decide trials. Furthermore, and most importantly, no branch of government has the right to exert direct control over the activities of another. The court had no basis in the MA constitution, which it cites, for its decision. They plucked a passage from the article, and have intentionally misrepresented what was written in order to justify their agenda-based decision. (The constitution was not intented to extend marriages to gay couples - just look at who wrote it.) This is similar to a semi-recent case in which the supreme court cited laws and constitutions of other nations to justify a ruling. 'Nice try.'
the judiciary branch is increasingly the only branch of government that an average person can actually use to get anything accomplished.
No, the average person does not necessarily want the rulings of an activist judge. Gay marriage was on the ballot in 11 states in 2004. It lost in ALL of them. Very clearly the "average" person does not want it in their state. While the judiciary -- working mainly through JURIES, not judges -- is a check upon the misbehavoir of the various branches of government (including, hopefully, itself), the government still exists to serve and implement the will of the majority.
The NY case is one in which the state's tax collector egregiously overstepped its rights to taxation. The NY tc should not have jurisdiction over the monies earned via telecommuting. What's next? Charging income tax for people who route their VPN packets through NY, on their way from NH to FL? The dissenting judge is correct and I hope the case is overturned.
Taxation Without Representation
It's really that simple. I am not sure why the courts cannot understand it. Any third grader in a history lesson can understand that.
Other than having a job in Anytown, USA:
I would think that any of the founding fathers would not stand any of this ridiculousness. It was a foundation of a revolution.
Of course, I may be a little facetious, but taxation is just out of control.
Whew! I feel a little better.
Coderz 4 Life
So, do you get to vote in both states?
No taxation without representation and all that jazz...
all the best,
drew
FreeMusicPush If you want to see more Free Music made, listen to Free
I believe the answer would be yes in certain States, that's why people need to vote straight Libertarian, to end all of this double taxation that the Republicrat government likes to do._ _____
____________________________________________
A vote against a Libertarian candidate is
a vote to abolish the Constitution itself.
Knowing how New York tries to get tax money wherever it can, I wouldn't be surprised to see them attempt to extend this to all IBM employees just because the W2's have a New York address.
Well, maybe they don't pay taxes. As a demographic, many convited felons are probably not high-earners. The gov'ts own stats say almost 1/2 of all "taxpayers" don't pay anything, and 80% of all income tax is paid by 20% of us. (I am sure even minimum wage drones get tagged for social security and medicare, just not any significant income tax).
So, the flip side is this; why not "no representation without taxation"? Say $100 per vote, vote as much as you wish. Would you still vote?
When the country was founded you had to be a white male property owner. Obviously that wouldn't fly today, and I personally have no bias against any race, sex, or even sexual orientation, but logically, what is so wrong that stakeholders and producers (taxpayers) should have more say than those who don't? It sure seems to be getting to the point where have-nots are simply voting for the haves to give.
This issue is a bit more complicated than you think.
New York provides the job, New York provides the professional opportunity, and New York should be able to tax that income, even if the employee for his own convenience was working outside of New York state,
This is an amazingly important quote, because it shows the psychology of these people.... New York doesn't provide the job, the company does!. New York provides the schools, roads, and other things which tele-commuters do not use. This is such an amazingly incorrect and self-serving decision... I hope it goes to appeal.
You may not get back as much as the full time resident but you are still using NY's infrastructure.
False. The state of New York does not own the phone lines, cables, or IT infrastructure that makes this possible. In fact, the state of New York already taxes the entities who do own these things.
You also get an benefit from telecommuting (less commuting time to office, lower property taxes, etc..).
Irrelevant and misleading. The state of New York gets a greater benefit of you not causing wear and tear on the infrastructure actually owned by the state (roads, bridges, schools, libraries, etc) while you generate revenue for a corporation based in and taxed by the state of New York, revenue which adds to the state tax coffers.
Finally, if its so wrong, why not just work in your home state (answer: you'll get a salary you'd probably never be able to get in your home state).
The point is that the person in question is working in his own state. For example, I have a friend who works for a company based in the state of New York with employees many different states. Many of those states believe (correctly, I believe) that they have the right to be compensated by means of their tax systems for the services provided to the employees of this company. It is very unlikely that many of the other states in question would be impressed by the argument that those employees are not actually working in the states in which they actually do work.
Ultimately, the questions raised by the avaricious exploitation by the state of New York of out-of-state employees of a company based in New York are a matter of interstate commerce, and therefore subject to the jurisdiction of the federal government.
If we ran the US like that, it would still be Britain, and Canada would have all the liberty, courtesy of the American colonists who would have followed your advice and left. But we don't - at least those of us who are patriots, who believe in liberty. The reason we have the most stable significant-sized government in the world is because it's self-modifying. The "American Way" is to change the government to suit the people. It's "love it or leave it" traitors like you who ruin our country, by reducing it to the level of any tyranny, where the people are stuck with the government they get. I encourage traitors like you to leave, or else get left behind as we change your country around you.
--
make install -not war
You are ignorant. meaning uninformed. lacking in knowledge. needing facts to understand.
Nobody NOBODY NOBODY in New York city is gonna be arrested for dildos, sex devices, vibrators, Traci Lords tapes (from when she was under 18), or tapes or DVDs of human-animal sex.
They CAN'T GET 12 LOCALS TO SAY "GUILTY". End of story. Everyone knows it. so the police don't arrest. the procecutors won't procecute. The new yorkers WILL NOT CONVICT.
LOCAL STANDARDS define obscenity and around here that shit ain't obscene.
Someone needs to do SOMETHING about these judges making laws out of thin air.
Clearly this ruling is contrary to the interstate commerce clause of the Constitution. By this court's "logic" Everyone employed by any company has to pay taxes to EVERY municipality and state that the company has a presence in.
People love to talk of the greed of corporations for money, and that talk is somewhat justified. Too little and seldom, however, is the talk of the greed of GOVERNMENTS who think they have a God given right to a "cut" of all money that flows through the economy.
When is this court going to demand income taxes from all those offshore Indian programmers that I'm sure more than one NYC basef firm employs?
In the long run, if this were to stand, and I think it won't, because federal judges, being bigger pompous asses than even state judges, won't stand for federal authority to be usurped, this tax scheme would have a DEVASTATING effect on NYC and it's economy.
Corporatism != Free Market
Thats one of the unique things about America, anti-american statements are just about the most American thing you can do.
The important piece of this to the states is not where you were when you worked, but where the company did business. If the company's business operations are in their state and you contributed to the business operations in that state, then that state is going to examine what was done and may lay a claim to your wages. However, if you can document that the company paying you has business operations in the state you are in and that you worked for those business operations, then you pay income tax to the state you are in.
First example: if you work for Company Y and Company Y sends you to Texas to install a computer system, Texas does not have the ability to claim any of your wages because the majority of the business operations for Company Y are in the state Company Y does business. Texas makes up for it by charging sales tax.
Second example: (personal) While living and working in Colorado, I made a point of working in the satellite office of a company that was located in Indiana, even though the project I was working on was run out of (and paid out of) the Indiana office. Because it was a real office owned by the same parent organization, because I made a point of having a desk and a phone in that office even though I was a W2 contractor, and because that office had similar business operations, Colorado claimed my wages, and Indiana could not.
One of the issues facing contractors - those of you who are truly self-employed and paid 1099 as I used to be - is that you need to make a concerted effort to have a physical office space and to do the majority of your work out of that office. You need to document the hours spent in that office, etc. Then (as most of you know), you avoid the taxation issue where two states contend for your wages.
One of the problems facing contractors is that many are being forced to work for companies by going to "approved vendors" as W2 employees. This is the same problem facing those who telecommute.
If you're paid W2, live in state A, but the business operations are in state B - well, this NY ruling sets a dangerous precendent (and NY is not alone in going after these situations) Even though you physically are located in another state, the company that is paying you as a W2 does not have or pay for a physical office space in your state and does not have any business operations in your state. As a result, the state can rule that you owe them income taxes as the deciding factor is not where you were but where the business paying you operated. The precedent is "we, the state (or city) have created an atmosphere for this business to exist and operate within our state's boundaries, therefore you owe us income tax on any wages earned while doing work for the business operations located within our limits." The issue being that the state you live in wants its cut too.
Note: areas that border - and someone bought up Cincinnati, which borders Ohio, Indiana and Kentucky - often have agreements which allow someone who lives in one state but works in another state to only pay taxes in the state in which they live. These agreements date to the times when people could only travel so far in one day in order to work.
Basically, US state tax law has not yet taken into account the ability people have to telecommute. Contact your legislator and get them working on it. Not that they care much, but maybe you can find someone to champion the issue.