Telecommuters Must Pay New York Taxes, Appeals Court Rules

by Glen Shapiro, LawAndTax-News.com, New York

31 March 2005

The Court of Appeals on Tuesday upheld by a 4-3 vote a controversial New York tax policy which obliges telecommuters employed by New York firms to pay state taxes on 100% of their income.

Unlike many of its neighbours, New York applies the 'convenience of the employer' test when deciding how to tax telecommuters, rather than basing their assessment on the residence status of the worker in question.

In the Matter of Huckaby v New York State Division of Tax Appeals, this meant that although computer programmer Thomas L. Huckaby lived and worked in Tennessee, and spent just 25% of his working days during the period in question physically present in New York, the state tax authorities believed that he was liable to pay tax there on 100% of the income that he earned.

This decision was disputed by Mr Huckaby, although he acknowledged liability for New York income taxes for the portion of his working life spent in New York between 1994 and 1995.

Earlier this year, Mr Huckaby's attorney, Peter Faber argued that determining the taxation of telecommuters on the basis of whether their status is necessary, or merely convenient, for their employer violates the equal protection and due process clauses of the US Constitution.

Speaking to the New York Law Journal this week following delivery of the verdict by the divided panel, Nicole Belson Goluboff, an attorney specialising in telecommuting issues observed that:

"The decision is not only bad for telecommuters nationwide, but for New York businesses. It compromises their ability to recruit and retain candidates from a nationwide and highly skilled applicant pool. It is a reaffirmation of New York's anachronistic and counterproductive hostility to telework."

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