A New York appeals court has again upheld the state’s “convenience of the employer” rule, which can tax the pay of remote workers who live elsewhere but work for a New York employer, the National Law Review reports. The early-July ruling rejected a constitutional challenge from a Connecticut resident who teaches at a New York law school.
Why the court sided with New York
The court found the school was indifferent to where the professor taught from, so working from Connecticut was his choice and not an employer necessity. That meant his earnings counted as New York income. A pandemic-era order required the school to teach remotely, the court noted, but it did not require him to teach from Connecticut. The judges said any change to the rule belongs to the New York Legislature and Tax Department, and the professor has signaled he may appeal.
Which states have a version of the rule
The National Taxpayers Union Foundation counts eight states with some form of the rule: Alabama, Connecticut, Delaware, Nebraska, New Jersey, New York, Oregon and Pennsylvania. Their reach differs. New York, Delaware, Pennsylvania and Alabama can affect all remote workers for in-state employers, while Connecticut and New Jersey apply theirs only to residents of states that have a similar rule. Oregon’s covers managers only, and Nebraska’s reaches nonresidents who physically work there at least seven days. Other guides list the states differently, so check your employer’s state directly.
Most remote workers pay income tax to their home state and never file a nonresident return, TurboTax notes, though not always. Credits for taxes paid to another state usually keep workers from paying twice, according to tax guides, but they do not always cover the full gap. Employer payroll teams and tax professionals can say which rule applies.
Work is changing at large employers too: Barclays plans to cut about 5,000 jobs as it leans on AI and automation.
This article is for information only and is not tax advice.
