New York Court Rules Pandemic Remote Work Doesn't Escape State Tax: What It Means for Nonresidents

A New York appellate court has ruled that remote work performed during the pandemic does not exempt nonresident employees from state income tax under the convenience of the employer rule. This decision has significant implications for remote workers and employers across state lines.

Key Takeaways from the Ruling

The court upheld the denial of tax refunds for a Connecticut law professor who worked from home during COVID-19. The ruling clarifies that government-mandated office closures do not constitute employer necessity, meaning out-of-state earnings remain taxable in New York unless the employer specifically requires work to be performed out of state.

The Convenience of the Employer Rule Explained

Under New York's 20 NYCRR 132.18(a), nonresident employees' out-of-state workdays are treated as in-state workdays unless the remote work was due to the employer's absolute necessity. The court emphasized that the key distinction is whether work must be performed at a particular site for the employer's need, versus work that could be performed anywhere. In this case, the employer was indifferent to where the professor worked, so the convenience rule applied.

Constitutional Challenges Rejected

The court also dismissed arguments that the taxation violated the Dormant Commerce Clause and Due Process Clause. It held that nonresidents do not engage in interstate commerce merely by working from home, and the professor maintained sufficient connections to New York through his employment.

Implications for Remote Workers and Employers

• Employers with remote or hybrid workforces spanning multiple states should review tax withholding practices to ensure compliance with New York's convenience rule.
• Employees working remotely from other states may still owe New York income tax unless their employer requires them to work out of state for a specific business advantage.
• The narrow exception applies only when the employer derives a specific business advantage from the employee's out-of-state presence, such as proximity to clients or specialized equipment.

Practical Advice

If you're a remote worker in New York, understand that working from home doesn't automatically exempt you from state taxes. Consult with a tax professional to assess your situation and ensure proper withholding.