Convenience of the employer or of the tax man?

The Court of Appeals recently came down with a decision in a much followed case construing the legitimacy of New York State's policy of imposing New York State income taxes on work done out of state in connection with New York employment, when the work is done out of state due to the preference of the employee and could otherwise have been done in New York.

In Zelinsky v. New York State Tax Appeals Tribunal, a Cardozo law school professor who lives in Connecticut and sometimes works out of his home there on Cardozo law school business, was forced to pay income tax on the work performed in Connecticut to both Connecticut and New York.

Construing the "convenience of the employer" doctrine, under which such double tax is not assessed if the employee works out of state due to the employer's requirements, the Court of Appeals noted that allowing the income to escape New York taxation when the employee voluntarily chooses to perform the work in another state would be unfair to the employee's New York counterparts, who would have to pay New York tax on income earned while working in a New York home.

This tax policy of New York has aroused the anger of many neighboring states and it will be interesting to see if there is any retaliation in store.

A copy of the decision, written by Chief Judge Judith Kaye, may be found here:

Law.Cornell.edu - Decision by Chief Judge Judith Kaye

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