The Volokh Conspiracy

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Law & Government

Supreme Court Refuses to Hear New Hampshire v. Massachusetts—An Important Case Challenging Massachusetts' Taxation of NH Residents Working Remotely for MA Firms

But the issue of state taxation of remote workers is likely to recur.


Earlier today, the Supreme Court issued an order denying leave to file a complaint in New Hampshire v. MassachusettsThis is an important case challenging the constitutionality of Massachusetts' policy of taxing the income of New Hampshire residents working remotely for Massachusetts firms during the Covid pandemic, at a time when lockdowns and other restrictions prevented them from commuting to their offices in Massachusetts, as they had been doing before.

The order does not give a reason for the Court's decision. Here is all that it says:

The motions for leave to file the bills of complaint are denied. Justice Thomas and Justice Alito would grant the motions.

In my view, the court should have taken the case, and ruled in favor of New Hampshire. Massachusetts' policy and the arguments supporting it raise broader issues about state taxation of remote workers—a problem that is likely to recur in the future as remote work continues to become more common.

This was an "original jurisdiction" case brought directly to the Supreme Court because it involves one state government suing another. Under current precedent, the justices have total discretion over whether they want to consider such cases or not. In this instance, they obviously decided they didn't.

Thomas's and Alito's dissent may not be a result of a particular interest in the case. These two justices have long held the view that the Supreme Court's jurisdiction over state vs. state cases is mandatory, not discretionary.

The fact that the Court took over seven months to issue a ruling in this case and asked for a statement of position by the Biden administration's solicitor general's office is an indication they took the issue at least somewhat seriously (the administration filed a brief  urging them not to hear the case).

It's possible the Court ended up rejecting the case because Massachusetts' policy is now set to expire as the Covid pandemic recedes, a point emphasized in Massachusetts' most recent supplemental brief. If so, I think the justices were wrong to be influenced by this consideration. The New Hampshire workers affected by the policy still had to pay Massachusetts income taxes for many months during which they neither resided in Massachusetts, nor worked there. And the Bay State has no intention of giving the money back!

Be that as it may, I suspect we have not seen the last of this issue. Sooner or later, other states will also try to tax the income of out-of-state remote workers employed by enterprises within their territory. Unless the courts stop it, the opportunity to tax people who don't live in the state and can't vote in its elections will be too tempting to pass up. The temptation will only grow as remote work becomes more common, and the amount of potential tax revenue here grows.

Hopefully, federal courts will put an end to this type of "taxation without representation" before it becomes too widespread to easily get rid of.

UPDATE: I have made a minor correction to this post, indicating that the Massachusetts policy is set to expire soon, as opposed to having expired already. I apologize for the initial error.