New Hampshire Work-From-Home Employees Get Taxed From Massachusetts, Physical Location Of Employer
New Hampshire Work-From-Home Employees
Get Taxed From Massachusetts, Physical Location Of Employer
New Hampshire does not have state income tax. So, it is an attractive state for employees to reside. However, in October 2020, Massachusetts issued a temporary emergency regulation (later adopted as a final rule) that said workers who normally work in Massachusetts but who, because of the COVID-19 pandemic, were working in other states would still be required to pay Massachusetts income tax. But wait – New Hampshire said its neighbor’s bid to tax its residents across state borders was a “direct attack” on the state and its allure. “It disrespects New Hampshire’s sovereignty. It undermines an incentive for businesses to locate capital and jobs in New Hampshire,” state officials said in court filings.
New Hampshire asked the Court to enjoin Massachusetts from enforcing the regulation and to require Massachusetts to refund the payments (plus interest) that it collected from nonresidents. In its complaint, New Hampshire said, “Massachusetts has unilaterally imposed an income tax within New Hampshire that New Hampshire, in its sovereign discretion, has deliberately chosen not to impose.”
Massachusetts’ same taxing actions has also long been standard procedure in six other states (Arkansas, Connecticut, Delaware, Nebraska, New York, and Pennsylvania). A broad ruling by the U.S. Supreme Court could have impacted more than two million Americans in these states who once regularly crossed state lines to get to work. More than ten states urged the U.S. Supreme Court to take the case, saying the problems of cross-state taxation needed the court’s attention regardless of the pandemic.
But the U.S. Supreme Court denied New Hampshire’s request for the court to take up the matter and did so without any elaboration, though the order noted that Justices Clarence Thomas and Samuel A. Alito Jr. would have granted the motions. But teleworking is here to stay, and these remote work taxation issues are not going away. We expect the matter will surface again in the near future.
For any employer who has work-from-home employees, there are a myriad of employment regulations (and tax) issues that often overlap between employer and the employee’s work-from-home location. The Firm is here to help you on these ever-changing issues. Please feel free to contact Dawn: firstname.lastname@example.org to discuss these matters as they apply to you or your business.
For more information on New Hampshire v. Massachusetts, go to: www.supremecourt.gov .
Information contained in this Memo is intended for informational and educational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney. It is considered advertising under laws of some states.
EPPS & COULSON, LLP
Attorneys admitted to practice in
California, New York, Colorado, Texas, and Oregon