Should a person who lives in one state and telecommutes to work for an employer located in a different state have to pay income taxes to the state in which their employer is located?
Due to a refusal by the US Supreme Court to hear an appeal in a case involving a telecommuter who worked for an employer in New York, the answer appears to be "Yes, the state in which the employer is located can collect income taxes from telecommuters who live out of the state."
The appeal was filed by Thomas Huckaby, a computer programmer who lives in Tennessee and works for a union with offices in New York. He usually telecommutes to work for his employer, but sometimes works at the organization's New York office.
Huckaby paid NY income taxes on the the part of his salary attributable to the time he spent working in New York. But New York ordered Huckaby to pay income tax on 100% of his salary. The state contends it's entitled to income taxes on the full salary because Huckaby lives in Tennessee "soley for his own benefit."
Huckaby's appeal claimed that New York's tax law is unconstitutional.
The refusal to hear the case, which is the second attempt to have the NY state law ruled unconstitutional, means that telecommuters could potentially be taxed twice on their income - once by the state the employer is located in and again by the state they live in.
For more information on taxes and telecommuters, and information on a bill called the The Telecommuter Tax Fairness Act, which would prohibit states from taxing out-of-state residents, see the Telework Coalition's website.
Telecommute Tax
Doesn’t this sound like one more skanky government attenpt to squueze more revenue out of businesses and individuals? I’m amazed (and angry) at all the means the public sector, whether federal, state or local, uses to replenish their coffers, usually because of greed/lust for power, inefficiency or just their basic inability to live within their means. Taxes on services (most states I’ve lived in charge sales tax only on products), on interstate purchases over the net and not refunding the tax previously paid on a rebated product are a few recent examples. I’m one who not only adds “and not a penny more” to the saying, “Render under to Caesar what is Caesar’s”, but also takes a very strict interpretation of just what is their’s.
Perhaps Huckaby should take a different tactic with the state of New York - and insist that by his being in Tennessee he is saving New York a considerable sum by not using their police, fire, educational and social services, nor is he exacerbating its pollution and congestion. In balance, maybe New York needs to compensate Huckaby.
Posted by: J H Peterson on November 14, 2005 at 12:56 PM