Employment Tax

United States | New York State ‘convenience of the employer’ ruling

Summary

In the latest update on the Zelinsky case, the New York State Tax Appeals Tribunal (the Tribunal) has upheld its long-standing convenience of the employer rule as held by the New York Division of Tax Appeals Administrative Law Judge. The latest opinion holds that a New York State employer allowing its employees to work remotely from home does not constitute its own necessity to have those job functions performed in those places, wherever that may have been.

The detail

As provided in our originally published Insight New York state ‘convenience of the employer’ ruling, December 21, 2023, this case is the Taxpayer’s second attempt to make an argument against New York’s “convenience of the employer test.” Taxpayer previously lost a similar case in 2003 and is now challenging the convenience of the employer rule under a new set of facts related to the COVID-19 pandemic mandatory non-essential business shut down.

To summarize how we got to the final right of review, the sequence of events is as follows:

• Taxpayer filed an exception to the Administrative Law Judge (ALJ) determination issued on November 30, 2023.
• Taxpayer filed a brief in support of their exception, the Division of Taxation (the Division) filed a brief in opposition, and taxpayer filed a brief in reply.
• Oral argument was heard on November 21, 2024, on which date began the six-month period of issuance of the final decision issued on May 15, 2025.

The Tribunal’s decision has provided that the ALJ correctly determined the following arguments:

• Taxpayer failed to show that services performed at home in Connecticut, as opposed to anywhere else, were required by his employer. As such the convenience of the employer rule was properly applied in computing Taxpayer’s New York source income.
• Regarding the convenience of the employer rule, the Tribunal stated that “…the nature of the employment relationship is paramount in considering whether the days on which a taxpayer claims to have performed personal services outside New York are subject to application of the convenience rule. In other words, the question boils down to whether the employer established a nexus in another jurisdiction by directing its employee to perform personal services in that out-of-state location for its own necessity…”.
• The conclusion that neither the dormant Commerce Clause nor due process was violated by taxing Taxpayer’s income earned while working from home in Connecticut.
• Taxpayer was found to avail himself of the economic market in New York through his employment with a New York employer and ongoing presence in the State, which satisfied the minimum contact required for due process.
• Taxpayer’s income was fairly apportioned in accordance with the dormant Commerce Clause. The Division finds that the statutory requirement for nonresidents to apportion and allocate their New York source income ensures that the income tax on nonresidents is limited to the in-state activities being taxed, which includes employment that is carried out within and without New York.
• Taxpayer’s scholarship (i.e., research and writing duties) with his employer is acknowledged as a significant part of his employment in addition to his teaching responsibilities. This differs from Taxpayer’s 2003 case where his scholarship duties were described by the Court of Appeals as “ancillary” when noting that it would not matter to his employer where he performed those duties so long as they were performed.

Taxpayer has four months from May 15, 2025 to appeal the Tribunal’s decision with the Appellate Division of the Supreme Court of the State of New York.

How we can help

Vialto can assist with New York state convenience of the employer issues, documenting remote/hybrid work positions and determining risk factors with such remote work arrangements. In light of the current New York state audit environment, Vialto can assist in reviewing the current state and local employment tax setup of employees in the payroll system specifically for New York, help to draft policies on state and local withholding tax requirements for remote workers and/or short-term business travelers, and provide support with employment tax notices or audits.

Please reach out directly to your Vialto contact or one of the individuals listed below to discuss next steps.

Contact us

For a deeper discussion on the above, please reach out to your Vialto Partners point of contact, or alternatively:

Tina Schrob
Partner

Jessica Castro
Director

Jake Webb
Director

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