Monday, October 31st, 2005
Teletaxation
If I ever go the consulting route again and am planning on telecommuting, I’ll seriously consider nixing New York off my list, unless the companies I work for are willing to pay additional income to cover New York’s bogus non-resident state income laws. Or at least take the added cost into consideration when searching for jobs.
WASHINGTON (AP) - The Supreme Court refused Monday to disturb New York’s system of taxing the income of telecommuters who live elsewhere but are employed by companies in the Empire state.
Justices passed up a chance to hear the appeal of a Tennessee computer programmer who claimed that New York’s tax law is unconstitutional.
Thomas Huckaby had been ordered to pay New York income tax for his full salary, not just the time he spent at the New York offices of the union for which he worked. He lived 900 miles away in Nashville.
The case gave the court a chance to clarify when states could pursue income taxes based on the location of the corporate headquarters, not the worker.
“This case brings to the fore the plight of every telecommuter who works in one state for an employer located in another,” justices were told in a filing by Peter Faber, the lawyer for the worker.
He said more than 40 million people perform at least some work from their home, and that one-in-five teleworkers report to a supervisor in a different state.
New York lawyers argued that the state was entitled to tax Huckaby’s earnings because the worker chose to live in another state “solely for his own convenience.” The income would have been exempt if he were required to work elsewhere, under the state system.
Huckaby paid some New York taxes, based on time he spent in New York state. But state courts said all his income should be taxed. The issue had split the lower court.
“New York has the right to tax 100 percent of a nonresident employee’s income derived from New York sources,” according to the 4-3 decision by the Court of Appeals of New York, which acknowledged the decision could discourage telecommuting.
I found an interesting discussion on the subject when it first came up in March here. What concerns me is that with this law, the individual has to pay tax on his entire salary, and that salary is also subject to taxation by the state he or she lives in, assuming the two states don’t have some sort of arrangement. Hopefully California won’t pull a stunt like this any time soon… but considering their budget woes, and the fact that in they have taxed pension benefits for people who no longer live in the state, I suppose it’s possible they might consider something like this. New York is apparently considered a trend setter on taxation law. Joy.
