Supreme Court Rejects Telecommuting Case

By Gina Hollland Associated Press

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.

The case is Huckaby v  New York State Division of Tax Appeals, 04-1734.