>The Appellate Division for the 3 rd Department found that since the employee – Thomas Huckaby – worked from Tennessee for his own convenience rather than employer necessity, all of his earnings are taxable are New York state’s tax rate, according to a New York Law Journal report. The case is Huckaby v. State Division of Tax Appeals.
Overall, the case hinged on two factors:
- the “convenience of the employer” test
- a question under the due process and equal protection clauses of the U.S. Constitution.
Under the convenience of the employer test, out-of-state employees of in-state employers are allowed to allocate income between their home and working states, but only if they work out of New York state due to the employer’s necessity.
In 1994 and 1995, Huckaby spent 75% of his time working in Tennessee and apportioned his income accordingly between the two states – 75% for Tennessee and 25% for New York. New York though says 100% of Huckaby’s income should be subject to income tax in enforcing a law meant to ensure nonresidents pay their fair share for the services they receive by virtue of working for a New York employer. The 3 rd Department agreed and said the taxpayer “derives benefits from New York and, thus, there is ample justification for the state to tax the income he derives from New York.”
Huckaby’s attorney, Peter Faber of McDermott, Will & Emery in Manhattan, argued unsuccessfully that the test contradicts Tax Law Section 631, which allows New York to tax nonresidents only on income resulting from work “carried on” in this state. On the constitutional claims, Faber admitted that there was sufficient nexus between his client and New York to warrant the imposition of income tax. He argued, however, that it was not enough to warrant a tax on all of his income.
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