TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Wednesday, March 30, 2005

NY Court of Appeals Upholds Tax on Non-Resident Telecommuter

Back in September, we blogged the unsuccessful attempt by Cardozo Tax Prof Edward Zelinsky to avoid paying New York state income tax on the portion of his salary attributable to his work in his Connecticut home office.  In January, we blogged the oral argument in the New York Court of Appeals in Matter of Huckaby v. New York State Division of Tax Appeals, in which the taxpayer Huckaby tried to distinguish his case from Zelinsky's:

Huckaby, however, raises different issues, which Peter L. Faber of McDermott, Will & Emery in Manhattan hopes will yield a different result. Unlike Zelinsky, Huckaby is a telecommuter. Also unlike Zelinsky, Huckaby's principal place of business is outside of New York -- so far outside New York that he rarely and only indirectly benefits from government services in the state. Huckaby lives approximately 900 miles from Manhattan.

"Mr. Huckaby's case presents the plight of a nonresident telecommuter," Faber argues in his brief. "Telecommuting did not exist when the regulation at issue first appeared on the scene, but it is widespread now." Faber contends that the convenience of the employer test, as applied to Huckaby, is in violation of the equal protection and due processes clauses of the U.S. Constitution and contrary to "common sense."

The New York Court of Appeals yesterday in a 4-3 decision rejected Huckaby's argument:

The issue here is to what extent the salary paid by a New York employer to a resident of another state who works most of his time outside, and beyond commuting distance from, New York is subject to New York State income tax. The majority holds that 100% of the employee's income is taxable in New York, so long as (1) any significant part of the employee's work is performed in New York, and (2) the employer does not require the employee to work outside New York.

For media accounts of the decision, see here and here. (Thanks to reader Ben Cunningham for the tip.)

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