In an opinion issued on May 15, 2025, the State of New York Tax Appeals Tribunal, the highest administrative forum for state tax appeals, upheld the application of the state’s income tax “convenience rule” imposing New York tax on wages earned by a New York City law school professor while he worked from his Connecticut residence before and during the COVID pandemic. The petitions had been filed by taxpayers Edward A. and Doris Zelinksy. An appeal of this decision to a New York appellate court is expected. 

The opinion affirms the November 30, 2023 determination of an Administrative Law Judge (“ALJ”) in the case. It accepts most of the ALJ’s reasoning while providing its own rationale on the constitutional and state law issues that will serve as guidance to the New York Department of Taxation and Finance and to New York-based employers with remote or hybrid nonresident employees working all or part-time in other states. The Department’s current administrative position on the convenience rule and the strict “home office” exemption can be found here. Please refer to this link for a discussion of the facts of the case and the 2023 ALJ determination.

The following are important takeaways from the Tribunal’s opinion:

• Most remote work will not be found to be for the employer’s business “necessity.” The Tribunal states that under the convenience rule New York will not tax a nonresident’s income if it derives from a New York employer’s participation in interstate commerce through the creation of a tax nexus in another state because of the business necessity for the employee to work in the other state. Therefore, hiring remotely in other states simply because that is where the best employee candidates reside and prefer to work for their convenience will apparently never provide sufficient nexus or participation in interstate commerce to avoid the imposition of New York income tax and wage withholding on the wages earned by such nonresidents.
• Constitutional due process was deemed satisfied because the taxpayer both worked in New York for part of the time during each year and availed himself of the economic market in New York through his employment with a New York-based employer. This is essentially the same rationale adopted by the ALJ in the case. In that earlier determination, the judge found that in our “modern economy” a virtual presence in New York through zoom meetings and internet technology was sufficient presence in New York to justify the convenience rule on constitutional grounds.
• Nevertheless, it remains unclear whether a nonresident employee must work at least one day a year while physically in New York for the convenience rule to apply. The applicable New York income tax regulation adopting the convenience rule is, by its terms, applicable where a nonresident employee performs services for his New York employer both within and without the state. The Tribunal’s opinion makes repeated reference to this convenience rule condition. Apparently, however, Department income and employment tax auditors have taken the position that New York-based employers and their nonresident employees physically working solely outside of New York during a tax year are nevertheless subject to the convenience rule for income tax and wage withholding purposes. Therefore, a central issue remains as to whether the virtual presence in New York of a remote nonresident employee who is linked to his or her New York-based employer through the internet and other electronic means effectively eliminates the need for the employee to have physically worked in New York during a year in order for New York income tax to apply under the convenience rule or even apart from that rule. It seems that an administrative or judicial decision on the taxation of an always remote nonresident employee who never sets foot in New York will be necessary to get some resolution of that issue. In the meantime, employers desiring to support a basis for the non-applicability of the convenience rule should, wherever possible, document terms of employment without mentioning the necessity, or even the possibility, of the employee’s physical presence in New York for work.