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."'"

Comments

Bad idea

[LordNimon]

All this will do is convince companies to move their headquarters outside of NY. The long-term affect will be to reduce the amount of taxes that NY collects.

I also think this is going to get appealed to the Federal courts. I live in Texas and work for a company that has an office here, but is headquartered in Massachussettes. I can't imagine paying MA income taxes, but it sounds like this court ruling says that I should (assuming the MA courts rule the same way).

Re:Bad idea

[Seumas]

All this will do is convince companies to move their headquarters outside of NY

More likely, it'll convince them to stop offering employees the option to telecommute. I've noticed that telecommuting is fizzling out as control-freak managers feel powerless when they don't have their employees ten feet away from them in a dimly lit cubicle punching code and commuting for three hours a day.

Of course, upper-levels still seem to do a lot of telecommuting - but not so much for everyone else.

Double taxation?

[Seumas]

Typically you pay a portion of taxes for the time you spent in each state. If you spend 50% of your time in each of two states, they usually have you pay 50% of your taxes in each. But that's if you are PHYSICALLY there.

This sounds as if you could end up paying full income tax in the state your company is in, plus full taxes in your own state - because your local state will consider you a full-time resident (since you do live there full time).

Not only that, but . . . how is New York offering him any representation for the taxes he pays there? He isn't a resident. He doesn't use their services. He doesn't commute. He doesn't have anything to do with anything there - other than it is where his employer is based.

For that matter, shouldn't companies overseas who contract with American companies to provide, say - tech support - have to pay American federal income taxes? I don't see how that would be any different from this scenerio whatsoever...

I'd sure hate to be stuck paying 56% in state income taxes, before even coming to my federal and county income taxes!