A client tells you that many, if not most, of their employees work remotely. How would you interpret that statement? It’s a matter of context, right?
In most cases it suggests that the employer-client has some sort of hybrid arrangement with their employees that requires them to be present at the employer’s place of business two-to-three days a week, and allows them to work from home the remaining days.
What is It?
In that context, generally speaking, remote work is an accommodation that the employer makes available to those employees who don’t need to be in a specific physical location – specifically, the employer’s office – in order to perform their duties. Most observers would probably describe this arrangement as a benefit that is offered by the employer for the convenience of their employees.[i]
All the employer requires of such an arrangement is that the “remote-working” employee (i) is able to quickly and securely access whatever information or document is necessary for them to perform their job well, and (ii) is readily accessible by email, smartphone,[ii] video conferencing, and other “tools” that enable them to bridge the “physical gap” between (1) their location and (2)(a) their employer’s office, (b) colleagues who are also working remotely, and (c) clients or customers.
Residents
In the vast majority of cases like the one outlined above, the employee resides within a distance of their “assigned” or “primary” work location – i.e., the employer’s office or other bona fide place of business at which suitable facilities to carry out the employee’s duties are maintained and available to the employee – that commuting to and from that location is a reasonable option. The employee’s residence is not so physically distant from their regular work location that is may be described as truly “remote.”
What’s more, the remote-working employee almost always resides in the tax jurisdiction (a state for purposes of this post, like New York) in which the employer’s place of business is located; the employee and the employer are resident taxpayers of the same state.
Nonresidents
In a not insignificant number of cases, however, the employee in question may reside in a state that is adjacent to the one in which their employer is located; for example, the common scenario of a New York employer with a number of employees who reside in those parts of New Jersey or Connecticut that are included in the Metro New York Region.[iii]
In other words, but for the hybrid work arrangement, a non-New York resident employee who resides within this region would commute to and from their employer’s place of business in New York every day.
However, in a growing number of cases the employee in question resides in a state that is not within what most folks would consider a reasonable commuting distance of their New York employer’s place of business; for example, California, Texas, Florida.[iv]
Let’s see how New York treats each of the above-described “remote work” situations.[v]
A Hypothetical
Assume Employer Corp (“Corp”) has an established place of business in southern[vi] New York. With one exception, this is the assigned or primary work location for all of its employees. These same employees reside within easy commuting distance of this location.
With two exceptions, all of Corp’s employees reside in New York;[vii] specifically, Employee B resides in New Jersey, and Employee C resides in Nebraska.[viii] Corp relies primarily on phone, computer and internet connectivity to conduct its business.
Corp’s New York employees take advantage of Corp’s hybrid work arrangement, and work from their in-state homes a couple of times a week, though one of these employees (Employee A) has a house in Connecticut (a second home) from which she will sometimes work.
On occasion, Employee B will work remotely from their New Jersey home.
Employee C, who resides and works exclusively in Nebraska,[ix] is not assigned to any location maintained by Corp as an office or place of business, does not have an office available to him in New York, and is not required to visit New York in connection with his employment. In fact, Employee C’s only contact with his employer and colleagues is through the use of so-called “internet-based digital communication platforms.”
New York Tax Law
New York imposes a personal income tax on a resident individual employee’s taxable income from all sources within and without the state.[x]
Thus, the compensation earned by any of Corp’s employees who are residents of the state is taxable by New York regardless of where the work for which the compensation is paid is performed; that includes work done at an employee’s second home in Connecticut, for example.
Nonresident Employee
New York also imposes a personal income tax on a nonresident individual employee’s taxable income, but only to the extent it is “derived from or connected with New York sources.[xi]
The New York adjusted gross income of a nonresident individual rendering personal services as an employee includes the compensation for personal services entering into his Federal adjusted gross income to the extent that such services were rendered within New York State.[xii]
The state’s regulations go on to state that “[c]ompensation for personal services rendered by a nonresident individual wholly without New York State is not included in his New York adjusted gross income, regardless of the fact that payment may be made from a point within New York State or that the employer is a resident individual, partnership or corporation.”[xiii]
Where an employee performs services for their employer both within and without New York, “the portion of the compensation attributable to the services performed within New York State” – i.e., New York sourced – “must be determined in accordance with” the state’s apportionment and allocation rules, including the convenience rule set forth immediately below, which effectively limits their application.[xiv]
The “Convenience” Rule
In determining the New York source income of a nonresident employee, New York’s personal income tax regulations provide as follows:
“If a nonresident employee . . . performs services for his employer both within and without New York State, his income derived from New York State sources includes that proportion of his total compensation for services rendered as an employee which the total number of working days employed within New York State bears to the total number of working days employed both within and without New York State.”[xv]
However, any allowance claimed by the nonresident employee for days worked outside New York “must be based upon the performance of services which of necessity, as distinguished from convenience,” obligate the employee to perform out-of-state duties in the service of their employer (the “Convenience Rule”).[xvi]
In other words, according to the Convenience Rule, if an employee works for a New York-based employer and telecommutes from an out-of-state location for the employee’s own convenience, those days on which such employee telecommutes are generally considered days worked in New York for wage allocation purposes.[xvii] Only days worked outside New York due to the employer’s necessity can be allocated as workdays outside New York.[xviii] Stated differently, nonresidents who are employed in New York, and who work out-of-state when not required to do so by their employers, must treat those days as if they had been present in New York, which results in New York source income.
Thus, by its terms, the Convenience Rule should apply with respect to a nonresident employee for a taxable year – for the purpose of determining the number of days worked outside New York – only where such employee performs at least some services for their employer when the employee is present in New York.
Technology
Telecommuting[xix] is generally deemed to be for the employee’s convenience, because the same work can be done at the New York office if the employee chooses to do so.
Thus, the Convenience Rule generally applies when the employee is assigned to the employer’s New York office or other New York place of business; that is the location at which they usually work.
Truly remote work, however, presents a different set of circumstances in that it allows the employee to live and work from anywhere outside New York with no expectation of an on-site presence.
Interpretation
Although taxpayers have often challenged the Convenience Rule as unfair or unconstitutional, New York has consistently prevailed . . . thus far.
Services Performed in NY
In one case,[xx]a taxpayer commuted three days a week from Connecticut to New York City, where he worked as a law professor at Cardozo School of Law. The other two days he worked from his Connecticut home for his own convenience. Although he apportioned his income on his nonresident tax return, the Convenience Rule required that all his work days be counted as New York days because it was not necessary for him to work from home and was not required by his employer.
On appeal, the court ruled that the Convenience Rule did not violate the Constitution.Since the entirety of the taxpayer’s salary and “benefits of tangible and intangible protections,” including police, fire, emergency services, and public utilities, were derived from New York sources, the tax did not reach beyond the portion of value that was fairly attributable to economic activity within the taxing state.
The court concluded that the taxpayer purposefully availed himself of an economic market in New York, had a minimum connection to New York via his employment, and received tangible and intangible benefits from working in New York City.
In another case,[xxi] the taxpayer, who lived and worked as a computer programmer in Tennessee, was employed by a company located in New York. As part of his employment, he and the employer agreed that his primary work location would be his home in Tennessee and that when necessary he would be required to travel to New York. Further, the company assisted the taxpayer with establishing a home office and reimbursed him for his monthly expenses. Thus, on his tax returns the taxpayer allocated his income based on the percentage of his physical presence spent working in Tennessee and New York – 75% and 25%, respectively.
On audit, New York determined that the taxpayer was subject to taxation on 100% of his income in New York based on the Convenience Rule.
The taxpayer appealed and alleged that the Convenience Rule was unconstitutional.
The Court of Appeals, in a four to three decision, disagreed with the taxpayer and concluded that taxation based on the rule of convenience did not violate his constitutional rights.
“The taxpayer chose to perform most of his work in Tennessee rather than New York,” the Court stated. Moreover, his New York “employer did not require him to perform any work in Tennessee and would not have objected if he had worked out of its New York office.” The Court also noted that the amount of time the taxpayer spent working in New York – 25% of his working days – was “significant.”
On the basis of the foregoing, the Court determined that the days worked in Tennessee were deemed to be for the employee’s convenience, resulting in 100% of his wages being determined as New York sourced. The distance from New York was not a factor; the New York workdays were.
Another case[xxii] involved a taxpayer, a human resource compensation consultant, who worked from his Florida home for two companies located in New York. On the tax return, the taxpayer apportioned the number of days he worked for the New York companies and paid the corresponding nonresident tax. The taxpayer argued that he was not present in New York on the days he did not work there and, thus, should not be subject to the state’s income tax on days worked outside New York.
The New York Division of Tax Appeals concluded that the taxpayer worked in Florida for his, rather than for the employer’s, convenience and, so, was liable to pay nonresident income taxes to New York. The Division stated that the taxpayer’s services “were not of such a specialized nature that they could not have been performed at his employer’s offices.” Since the employer’s allowance to work from home did not meet the necessity requirement, the taxpayer made the resulting choice to work at home. Accordingly, because it was not necessary for the taxpayer to perform services at his Florida home and the work location was for his convenience, the taxpayer was “not entitled to treat such at-home working days as non-New York days for purposes of income allocation.”
Significantly, in each of the above decisions the “remote worker” also worked in New York – while they were physically present in the state, they were performing services for their employer.
No Services Performed in NY
But what about an employee who does not have an assigned location, or one whose assigned or primary office is not in New York State? What if this employee is not required to perform any services in New York and, in fact, never goes to New York?
The Tax Appeals Tribunal[xxiii] summarized an exception to the Convenience Rule by identifying the following factors:
“It is well settled that a nonresident employed by a New York employer is not subject to the convenience of the employer test . . . [i] when she works outside of New York, [ii] performs no work within New York, and [iii] has no office or place of business in New York (i.e., where suitable facilities to carry out her employment duties are not maintained for or available to her in New York).”
Unfortunately for the taxpayer, she performed her job duties for her New York employer both within and without the state during the year at issue. Even though she performed no work at all in New York during the last quarter of such year, the Tribunal found that the work could have been performed at the employer’s office and, therefore, it was not performed out-of-state for the necessity of the employer.
That being said, a nonresident employee who can satisfy each of the above factors should be able to establish that compensation received from a New York employer is not subject to New York taxation, provided the employee did not previously render services to the employer in New York.
Therefore, if a non-resident employee works remotely from outside New York, and their agreement with the employer states that the employee has no obligation to report to the New York office at all, the employee should not be subject to New York tax in respect of their wages.[xxiv]
In fact, the Courts have held that remote workers who are 100 percent remote from outside New York, and who never come to the employer’s New York office (all meetings being held remotely), are not subject to the Convenience Rule.[xxv]
Employee was a domiciliary and resident of Connecticut for the year in question. Immediately prior to the time in question, he was president of Corp. Employee entered into an agreement with Corp in which he agreed to resign as president and to continue, instead, as a consultant for a two-year period. His duties were to be as assigned by Corp. The agreement contemplated that Employee would perform most of his duties at his home in Connecticut, but Corp reserved the right to ask Employee to perform duties in New York and elsewhere.
Employee relinquished the presidency of Corp and vacated his offices, following which he had no office in New York and performed no services for Corp in New York.
Employee filed a nonresident income tax return for the year in question in which he excluded from New York income any salary received after the date of his resignation. The state issued a notice of deficiency that allocated most of the salary to New York. Employee challenged the notice.
The Court noted that, according to the state’s regulations, the New York income of a nonresident individual includes compensation for personal services,
“only if, and to the extent that, his services were rendered within this State. Compensation for personal services rendered by a nonresident individual wholly without the State is not included in his New York adjusted gross income, regardless of the fact that payment may be made from a point within the State.”
When services are performed within and without the State, the Court continued, the regulation provides that “the employee can disclaim salary paid for days worked without the State only if the work was necessarily performed outside the State.”
Although under Employee’s agreement with Corp he could have been required to work in New York, it was undisputed that he did not work in New York. The Court stated:
“Although under [Employee’s] agreement with [Employer] he could have been required to work in New York, it is undisputed that he did not work in New York. That he could have been called to New York is of no import since the regulations make it plain that services rendered wholly without the State are not taxable in New York. Only when some work is performed within New York may some or all of the income be taxed in New York, and only then should [New York] determine if work was performed for the employer’s necessity. It is impossible to find a different meaning in the regulations.”
Based on the foregoing, because the Employee-C resides and works exclusively in Nebraska, has never resided in New York, has never worked in New York, and is not required to work in New York, he should not be subject to New York’s Convenience Rule. Right?
Revised Application
In 2006, New York State issued a Technical Service Bulletin Memorandum (the “TSB-M)[xxvi] that sought to explain what it described as the state’s “revised” position concerning the application of the Convenience Rule.
According to the TSB-M, it sought to address “situations where a nonresident . . . employee whose assigned or primary work location is in New York State performs services for an employer at that location and at a home office located outside of New York State.”[xxvii]
Pre-Revision Status
Before describing the above-referenced revision,[xxviii] the TSB-M sought to describe the then-current application of the Convenience Rule by noting the following:
“Under this rule, days worked at home are considered New York work days only if the employee’s assigned or primary work location is at an established office or other bona fide place of business of the employer (hereinafter, a bona fide employer office) in New York State.”[xxix]
Notwithstanding that the TSB-M, on its face, addresses the situation of a nonresident employee whose assigned or primary work location is in New York, the TSB-M gratuitously added the following:
“If the employee’s assigned or primary work location is at an established office or other bona fide place of business of the employer outside New York State, then any normal work day worked at home would be treated as a day worked outside New York State.”[xxx]
Presumably, the above statement contemplates a situation where a non-resident employee sometimes performs services for their New York employer within New York.[xxxi]
Revision
According to the TSB-M, for tax years beginning on or after January 1, 2006, in the case of an employee whose assigned or primary office is in New York State, any normal work day spent at the employee’s home office will be treated as a day worked outside the state if the employee’s home office is a “bona fide employer office.”
The TSB-M explains that if the employee’s home outside of New York qualifies as a “bona fide office” of the employer, then the days worked at this home office will be treated as days worked outside of New York. It then goes on to describe the circumstances and conditions under which an employee’s home may be treated as a bona fide employer’s office. Specifically, it identifies various factors to assist nonresident employees with determining if their home office constitutes a bona fide employer office. The factors are divided into three categories: the primary factor, secondary factors, and other factors. In order for an office to be considered a bona fide employer office, the office must meet either: (a) the primary factor, or (b)(i) at least 4 of the secondary factors and (ii) 3 of the other factors.[xxxii]
Again, the TSB-M’s focus is on the situation in which an employee’s assigned or primary office is in New York, and the employee performs services both within and without the state, thus requiring that the number of days worked outside the state be determined.
Where Are We Going?
I know where I’d like to go – Albany should scrap the Convenience Rule. It has no place in today’s digital, internet-based economy – though I would settle for a clear statement that the rule does not apply in the case of a truly remote employee.
Until then, I would not be surprised if the state decides to argue that a truly remote employee who is hired by a New York employer, but who “chooses” to continue working from their home state, rather than move to New York, is covered by the Convenience Rule notwithstanding the Rule is intended to cover a nonresident employee whose assigned or primary work location is in New York, but who also performs services for at a home office located outside of New York.
Perhaps we’ll see some progress in that direction when the Appellate Division renders its decision in the latest round of Zelinsky v. Tax’n & Fin. Comm’r,[xxxiii] but who knows?
The Tribunal decision being reviewed by the Appellate Division stated that the taxpayer had “availed himself of the benefits of the economic market in New York through his employment with” a New York employer, and this “manifested a connection to New York sufficient to satisfy due process.”
The Tribunal had affirmed an ALJ’s opinion in which it was stated that the taxpayer:
“had a virtual presence in New York when hosting Zoom classes and meetings with his students. In this modern economy with its internet technology, one can be present in a state without needing to physically be there (cf. Wayfair, 138 S Ct at 2094-2097 [where the Court overruled prior precedent requiring a business to have a physical presence in order to have the nexus required to collect and remit sales tax because “the real world implementation of Commerce Clause doctrines now makes it manifest that the physical presence rule as defined by Quill (Quill Corp. v North Dakota, 504 US 298 [1992]), must give way to the ‘far-reaching systemic and structural changes in the economy’ and ‘many other societal dimensions’ caused by the Cyber Age’”]).”
According to the opinion, the very reason the taxpayer was able to earn an income from their New York employer was “because he could be virtually present there to perform his duties.”
To top this off, the ALJ added that the taxpayer benefited from the:
“protections, benefits, and values, including his New York salary and benefits received from a New York law [employer] and the infrastructure that allowed him to successfully perform his duties from home, including his virtual presence utilizing the Zoom platform that allowed him to remotely [perform his duties].”
The virtual presence of an individual taxpayer in their capacity as an employee?[xxxiv]
Who knows how far Albany is prepared to go as it seeks to generate more revenue to spend.
The opinions expressed herein are solely those of the author(s) and do not necessarily represent the views of the firm.
Sign up to receive my blog at www.TaxSlaw.com.
[i] Unfortunately, from the perspective of my generation, it’s a cost of competition. I’d rather not pay rent for offices that sit empty for most of the week. Shared offices make more sense, under the circumstances. Alas, I’ve given up on trying to make my opinion heard. The future belongs to the younger generations.
[ii] A curse on humanity.
[iii] https://metroexplorer.planning.nyc.gov/about.
[iv] Might this change one day? A Japanese maglev train can make the trip from NYC to Miami in about 3.75 hours. A flight is about 3.25 hours. Ah, innovation, technology.
[v] Conceptually, the discussion would cover an employee who resides in, say, Buffalo, for example, but such an employee is already subject to tax as a resident of New York.
[vi] Granted, the South means different things to different people. For someone in Lake Placid, it may include the foothills of the Catskill Mountains. I’m reminded of Game of Thrones, in which the Wildlings who lived beyond The Wall thought of Winterfell as being in the South. Just humor me, please.
[vii] Remember Venn diagrams?
[viii] Employee C may have once resided and worked in New York but successfully abandoned their New York domicile and established a new domicile in Nebraska. Corp continued to employ them. Alternatively, Corp may have needed someone with Employee C’s skill set, and he came along at the right time and for the right price.
[ix] https://opportunity.nebraska.gov/business/why-nebraska/.
[x] NY Tax Law Sec. 601 and Sec. 611. The resident’s taxable income is derived from his federal adjusted gross income for the taxable year, with certain modifications based upon New York policy.
[xi] NY Tax Law Section 601(e), Sec. 631.
[xii] 20 NYCRR 132.4(b).
[xiii] Emph. added. 20 NYCRR 132.4(b).
[xiv] NY Tax Law Sec. 631(c); 20 NYCRR 132.4(b) refers to 20 NYCRR § 132.18.
[xv] Emph. added. 20 NYCRRR § 132.18.
[xvi] 20 NYCRRR § 132.18. In making the allocation provided for in this section, no account is taken of nonworking days, including Saturdays, Sundays, holidays, days of absence because of illness or personal injury, vacation, or leave with or without pay.
[xvii] “The policy justification . . . [is] that since a New York State resident would not be entitled to special tax benefits for work done at home, neither should a nonresident who performs services or maintains an office in New York State” (Speno v Gallman, 35 NY2d at 256).
[xviii] For example, attending a client meeting outside of New York that the employee is required to attend in person would qualify as necessary.
[xix] A work arrangement where an employee performs their job duties outside a traditional corporate office – usually from home office – and uses telecommunications technology to stay connected with their employer; the employee remains close enough to commute to a physical office regularly.
[xx] Zelinsky v. Tax App. Trib., 1 N.Y.3d 85 (N.Y. 2003).
[xxi] Huckaby v. NY State Div. of Tax App., 4 NY 3d 427 (2005), cert. denied, 546 U.S. 976 (2005).
[xxii] In re Holt, No. 821018 (NY Div. Tax App. 11/1/07).
[xxiii] Matter of Unterweiser, Tax Appeals Tribunal, DTA NO. 818462, July 31, 2003.
[xxiv] If the employee is assigned to the employee’s New York office but works remotely, query whether they may be reassigned to a different office.
Alternatively, the employer and employee may try to comply with the bona fide employer office rule in TSB-M-06(5)I to establish the home office as an office of the employer.
[xxv] Matter of Hayes v State Tax Comm’n., 61 AD2d 62, 64 (3d Dept 1978).
[xxvi] TSB-M-06(5)I; https://www.tax.ny.gov/pdf/memos/income/m06_5i.pdf.
[xxvii] Emph. added.
[xxviii] In order for an office to be considered a bona fide employer office, the office must meet either: a) the primary factor, or b) at least 4 of the secondary factors and 3 of the other factors set forth in the TSB-M.
[xxix] Emph. added.
[xxx] Emph. added.
[xxxi] In the Tax Appeals Tribunal’s decision affirming the ALJ’s determination against the taxpayer in In the Matter of the Petition of Zelinsky, Dec. DTA Nos. 830517 and 8306812 (May 15, 2025), the Tribunal explained that if the non-resident employee decided to work without New York other than at the direction of the New York employer, “the upshot would be that employees would be able to reassign the situses of their sources of income derived from employment by choosing an out-of-state location where they would perform their job responsibilities, thereby subjecting an employer to the law of that jurisdiction without the employer’s consent.”
[xxxii] https://www.tax.ny.gov/pdf/memos/income/m06_5i.pdf.
[xxxiii] That being said, an article in Bloomberg’s Daily Tax Report, “NY Judges Question Viability of Tax on Remote Work in Modern Age” (June 2, 2026), indicated that, during oral arguments a New York appeals court appeared open to overturning the state’s strict tax rules for remote work performed during the pandemic, by questioning the state’s assertion that such telework arrangements were done out of convenience. [The case is Zelinsky v. Tax’n & Fin. Comm’r, N.Y. App. Div., 3d Dep’t, No. CV-25-1156, oral arguments held 6/1/26]
According to the article, Justice Clark, of the Appellate Division, Third Department, pushed back on the state’s argument that it was right to tax the income of a law school professor for work he performed from his Connecticut home when public health restrictions prevented him from accessing classrooms in New York. Attorneys representing the state defended the practice because the state’s “convenience of the employer rule” allows it to tax the income of nonresidents who work remotely for New York-based companies unless their employer requires them to perform telework.
“Doesn’t it just seem a little arbitrary or irrational during the pandemic, when everyone was told to stay at home, that you wouldn’t go to your home to work during that period,” Clark asked.
The article went on to describe how New York courts have been deferential to the state’s interpretation of its ability to tax income. But the pandemic raised new questions as to whether the tax rule makes sense in an era of Zoom meetings and hybrid work.
Interestingly, in the Bright decision, the US Supreme Court overturned the “Chevron deference” and ruled that federal courts should rely on their own interpretation of ambiguous laws rather than defer to agency interpretations. 603 U.S. 369 (2024).
[xxxiv] On the flip side, as the concept of economic nexus has evolved throughout the country, businesses are finding that they owe taxes in jurisdictions in which they have no physical presence. Query the effect of a remote workforce on a business’s tax nexus.