Convenience-of-the-employer rule
A sourcing rule under which a state taxes a nonresident employee's remote workdays as if they had been worked in the employer's state, unless the remote arrangement is required by the employer rather than chosen by the employee.
Every other wage-sourcing rule asks where the work was performed. This one asks why it was performed there. If you work from your kitchen because you prefer it, the state treats the day as a workday in the employer's state; if you work from your kitchen because the employer requires it and the role genuinely cannot be performed in that state, it does not.
Six jurisdictions apply it, in two forms. New York, Delaware, Nebraska and Pennsylvania apply a general rule to any nonresident employee of an in-state employer. Connecticut and New Jersey apply a mirror version reaching only residents of states that impose a similar test — a retaliatory design intended to protect their own residents rather than to raise revenue from strangers.
The burden of establishing necessity sits with the employee and the employer, and New York in particular sets it high through a bona fide employer office test that few home offices satisfy. Arkansas repealed its rule in 2021 and Massachusetts allowed its pandemic-era sourcing regulation to expire, so the direction of travel is away from the rule — but slowly.
The rule is at its worst for someone living in a state with no income tax. Where the home state taxes income, it credits back what the employer's state took. Where it does not, there is no resident return on which to claim that credit, and the employer state's tax is final.
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In one sentence
What is convenience-of-the-employer rule?
A sourcing rule under which a state taxes a nonresident employee's remote workdays as if they had been worked in the employer's state, unless the remote arrangement is required by the employer rather than chosen by the employee.