Taxes

Supreme Court Won't Hear Case Challenging Massachusetts' Income Tax on Telecommuters Who Don't Live or Work in Massachusetts

The Court left increasingly urgent questions about taxing remote workers up in the air.

|

The Supreme Court won't take up New Hampshire's lawsuit against Massachusetts over teleworker taxes. Massachusetts has a policy of taxing out-of-state teleworkers working for Bay State companies.

The Court passing* on the case frustrates many who were hoping to get nationwide clarity on how states can tax the income of out-of-state workers, particularly teleworkers. 

Income tax for those living in one state and working in another has always been a tangled mess, with rules differing from state to state. The confusion has been compounded during the pandemic, with the rise of teleworkers who live and work out of state.

States have the ability to tax income that was earned by working in the state and income that was earned by residents of the state. This means that if someone works in New York and lives in Vermont, then New York can tax it because it was earned by working in New York, and Vermont can tax it because it was earned by a resident of Vermont. Fortunately, like most states, Vermont offers a refund of the amount one pays in New York income tax, so the income would not be taxed twice. 

But these refund schemes vary from state to state, creating a complicated web that can make filing as an out-of-state worker a headache. 

For remote workers, the confusion only grows. Take the case of a person who lives in New Hampshire but, under typical circumstances, commutes to work in Massachusetts. As of 2017, more than 103,000 people—that's more than 15 percent of all New Hampshire workers—were in this position.

During the pandemic, many of these people were forced to work from home. This would seem to mean that because they earned the income while working at home in New Hampshire and are residents of New Hampshire, that income could only be taxed in New Hampshire. And since New Hampshire has no income tax, that means they would owe nothing on that money. 

This is where the controversial Massachusetts rule comes in. Effective March 10, 2020, Massachusetts instituted a temporary rule that gave the state the power to tax the income of remote workers who typically work in Massachusetts. For those in income tax-free states like New Hampshire, that means being subject to income taxes that people who work non-remote jobs in the state don't have to pay.

The rule states: "All compensation received for services performed by a non-resident who, immediately prior to the Massachusetts COVID-19 state of emergency was an employee engaged in performing such services in Massachusetts, and who is performing services from a location outside Massachusetts due to a Pandemic-Related Circumstance will continue to be treated as Massachusetts source income subject to personal income tax." 

New Hampshire officials sued Massachusetts over this policy, considering it an affront to their sovereignty to decide how workers in their state are taxed. 

"In the middle of a global pandemic, Massachusetts has taken deliberate aim at the New Hampshire Advantage by purporting to impose Massachusetts income tax on New Hampshire residents for income earned while working within New Hampshire," reads New Hampshire's complaint. "Upending decades of consistent practice, Massachusetts now taxes income earned entirely outside its borders. Through its unprecedented action, Massachusetts has unilaterally imposed an income tax within New Hampshire that New Hampshire, in its sovereign discretion, has deliberately chosen not to impose." 

In an amicus curiae brief advising the Supreme Court, the solicitor general said on behalf of the U.S. government that the Court should pass on the case because—as established by the precedent set by Mississippi v. Louisiana and other similar cases in order to protect the rights of states—the court will not take state-on-state suits "unless the threatened invasion of rights is of serious magnitude and established by clear and convincing evidence."*

Legal scholars note that, in general terms, this means the Court will not take on state-on-state suits unless there is a clear reason why this suit is being brought by a state and not by a private citizen affected by the issue. 

"New Hampshire does not invoke the types of interests that would warrant such an exercise," reads the amicus curiae brief, "and the issues New Hampshire seeks to present can adequately be raised and litigated by New Hampshire residents who are subject to the Massachusetts income tax."*

While this may be the right decision, the Court passing on the case leaves open the question of whether states have the ability to tax out-of-state remote workers. The Massachusetts rule, although temporary, could set a precedent that remote workers in another state have strong enough economic ties and impact to the state where their company is located to merit being taxed out of state. 

This could cause further problems, especially for those who live and work remotely in states that do have an income tax, unlike New Hampshire. As of now, state rules regarding refunds for those who work out of state do not usually include remote workers. This means that if teleworkers were taxed in the state where their company is, they could be taxed twice on the same income. 

In our increasingly remote-work world, people now have the opportunity to choose where they want to live, and, independently from that, where they want to work. This gives them the opportunity to live in lower-tax states like New Hampshire and work for companies based in urban centers in states like Massachusetts, New York, and California.

Remote employees of Massachusetts companies living in New Hampshire aren't using the roads in Massachusetts or creating trash that Massachusetts must dispose of. Their employers are already paying corporate taxes in Massachusetts. Out-of-state employees are not consuming in-state public goods, and should not be required to pay for them.

*CORRECTION: A previous version of this article misattributed passages from the amicus curiae brief from the solicitor general on behalf of the U.S. government. A previous version of this article also misstated the Supreme Court's June 28 order in New Hampshire v. Massachusetts. That order did not address the merits of a jurisdictional dispute.

NEXT: House Votes To Repeal 1957 and 1991 Authorizations for the Use of Military Force

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. >>leaving increasingly urgent questions about taxing remote workers up in the air

    they could just not.

    1. Making money online more than 15OOO$ just by doing simple work from home. I have received $18376 last month. Its an easy and simple job to do and V its earnings are much better than regular office job and even a little child can do this and earns money. Everybody must try this job by just use the info
      on this page…..VISIT HERE

      1. Everybody can earn 500 dollars Daily… Yes! you can earn more than you think by working online from home. I have been doing this job for like a few weeks and my last week payment was exactly 25370 dollars. COPY This Website OPEN HERE………… READ MORE

  2. Seems like a good time to quit.

    The classic move is to declare your residence another office and re-hire you at the office in the other state.

    1. The state losing money would then sue the employer for “pretextual” transactions. They want the money and they’re going to fight for it no matter how immoral or unethical they have to be.

      1. I think this is a great plan. New Hampshire should impose a tax on anyone who works for the Massachusetts government. Just because.

        1. ^ this

  3. Just a case of Massholes being Massholes.

    1. NYS is doing the same.

      1. Is another remarkably authoritarian and stupid state with shitty laws.

  4. Some things have changed for some workers. I work in an oil refinery, so have not had the option of telecommuting. You can thank others like me for your constant assumption of access to gasoline, electricity, water and sewage, and food.
    Thinking about it, if a company were to convert to mostly telecommuting, they could lease a space away from the old offices and schedule regular in person meetings with telecommuting workers. In New Hampshire, this could be once or twice a month. They could lease with other companies, each having use of the NH facility on a regular basis.
    Declaring this space to be the permanent new NH branch office would settle the tax issue for the employees. No Mass-transit, no Mass taxes.

    1. Employees should pay taxes for the state they live in. End of story. Doesn’t matter where the employer resides, the employer pays business taxes for where the employer is. I mean, duh.

      1. The argument, not that I agree with it, is that you’re using roads and other services in your employer’s state, even if you don’t actually live there. So that justifies, again not that I agree with it, charging for those roads and services by forcing you to pay income taxes.

        1. You lost me at “taxes”. I don’t agree with taxes. I disagree twice as much with paying taxes twice. If I were an expat I would be paying three times.

  5. To paraphrase some of the commenters here, “well if they are not paying taxes in New Hampshire it’s only fair that they should pay them to someone else, it’s their ‘fair share’ after all.”

    1. You sure are good at refuting the voices in your head.

    2. MA and NH are about as diametrically opposed as two neighboring states can be. On the subject of roads, MA spends 6x a much as NH. So even if I were to buy the “fair share” argument (which I do not), the fair share, regarding roads, would be about 16% as much in NH as MA.

      And a hundred other examples of why NH doesn’t have to tax it’s residents into oblivion.

  6. Typical leftie dem move tax the shit out of anything with a pulse.

  7. “unless the threatened invasion of rights is of serious magnitude and established by clear and convincing evidence.”

    OK, so the same guys that ruled men are women and women are men, and anything in between is anything else in between are now ruling the ‘taxation without representation’ is NOT of a serious magnitude?

    1. It would be nice if they could give a for example, so that people compare this abuse of rights with one that is a ‘serious’ abuse of rights. Also, I understand the desire to have a limited resource private citizen engage into a protracted legal dispute with a nearly unlimited tax-payer funded entity.

  8. So does that mean China can impose an income tax on Apple employees that live in the US?

    1. They could try and fail.

      If enough NH residents sued their employers’ payroll providers over MA tax withholding, they’d force the issue to end.

      MA employers would just stop withholding.

  9. End state income tax. Problem solved.

  10. Gosh, I used to not work and live in Massachusetts!

    Seriously, my employer was in Massachusetts, but I was not. I telecommuted as did 90% of the employees. I would be livid if I had to pay both California AND Massachusetts taxes for the same fucking job.

    1. I live in NE and know plenty of people who pay double state income taxes. For them it’s worth it because the pay in MA is significantly higher than their home states which offsets taxes and commuting costs.

      1. Yeah. Mass is in driving distance of Maine, but actually has jobs if you don’t mind the hour and a half commute each way.

        1. Except NE is Nebraska not Maine. Not sure it wasn’t a typo but Nebraska isn’t in commuting distance from MA.

          1. New England can also be NE.

            1. I read it as New England as well, because really nobody lives in or thinks about Nebraska .

              1. Politicians do! They have a cute pet name for it and other parts of America, “Fly-over country”.

        2. Yes. Northern Mass is within driving distance of Mass proper.

          1. Mass proper stopped existing not long after the time of the American Revolutionary War. Now it’s a festering shithole devoid of much in the way of individual liberties or thought. See also New York, Upstate, comparison.

  11. Seems to me the answer is simple. When MA doesn’t allow you to go to work because of the pandemic and forces you to stay out of MA then just change your MA W-4 to zero out your MA tax liability. Heck, make it 500 exemptions if you have to then let them sue you so you can counter-sue and see if that’s something SCrOTUS will take up. It may mean no more vacation trips flying through Logan or any other MA airport but it might be worth the sacrifice.

    Seriously, joke ’em if they can’t take a fuck.

  12. Look on the bright side. The Supreme Court finally found a matter that it couldn’t pontificate on.

    Not the “no standing” bullshipping, but actually meeting something that it couldn’t figure out how to mess with.

  13. Crap, if there was ever an example of something that actually was “among the several states”, this is it.

    Seems like it’s been robertsed.

  14. The next step is trying to collect income taxes from you just because you were born in the state. No matter where you live or work.

  15. I love that Reason defends this saying “corporate taxes are assessed” while at every other twist and turn argue against corporate taxes every fucking chance they get.

    I see no reason a state or city can’t just tax a company’s workers based on it’s HQ location. Seems fair enough. If you don’t like it, go find another job. It’s the free market right?

    1. Why not just tax people who don’t live there and whose employer’s HQ isn’t there? Feelingz.

    2. “I see no reason a state or city can’t just tax a company’s workers based on it’s HQ location.”

      Well, yes, but you’re a retarded cunt, so your lack there is understandable.

  16. Well, as a 48 state truck driver this could really suck…

    “You have to pay *every* state’s income tax!”

    1. Don’t laugh.
      Sometime when you are bored, research how professional sport athletes are taxed everywhere they play.

  17. Don’t even try to do business there.

  18. Businesses Businesses don’t withhold the tax. Individuals don’t pay the tax. Make them extradite every out of state worker. See if the Supreme jerks can ignore this illegal tax then.

  19. Businesses don’t withhold the tax. Individuals don’t pay the tax. Make them extradite every out of state worker. See if the Supreme Jerks, I mean Justices, can ignore this illegal and unconstitutional tax then.

  20. Remote employees of Massachusetts companies living in New Hampshire aren’t using the roads in Massachusetts or creating trash that Massachusetts must dispose of. ”

    Someone has to pay for all the layabout brothers-in-law and cousins on the state payroll! The money for state police overtime scams don’t grow on trees, you know.

    1. This ^^^. In Mass the argument was essentially “the state is loosing revenue, so we have to do something” ideals are for children’s someone has to pay for all the critical state employees.

  21. PROTAC In Vitro Evaluation
    https://protac.bocsci.com/services/protac-in-vitro-evaluation.html
    Targeted protein degradation provides a broad prospect for drug discovery.

  22. Bio-layer Interferometry (BLI) Service
    https://www.profacgen.com/bio-layer-interferometry-bli-Service.htm
    Profacgen provides a comprehensive panel of services for the study of protein-protein interactions,

Please to post comments

Comments are closed.