Taxing Out-of-Staters Working From Home

For John, BLUF:  The COVID-19 Pandemic has opened a whole pandora's chest of issues, including tax issues.  Nothing to see here; just move along.

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Tax lawsuit against state strengthens

Here is the sub-headline:

14 states side with N.H.

From The [Lowell] Sun, by Reporter Sean Philip Cotter, 26 December 2020, although the link goes to the original of the story, in The Boston Herald.

Here is the lede plus three:

States are lining up against Massachusetts and siding with New Hampshire in the lawsuit over the the Bay State’s policy taxing the income of out-of-state residents telecommuting for Bay State companies amid the pandemic.

The Granite State had sued Massachusetts in October in the ongoing income- tax border battle over a temporary rule that imposes the state’s 5% income tax on employees of Massachusetts companies living and working remotely in other states.  New Hampshire Gov. Chris Sununu and his state sued, asking the U. S. Supreme Court to take up the case after Gov. Charlie Baker extended the pandemicera rule.

New Hampshire continues to petition the Supreme Court to weigh in.

“Massachusetts has radically redefined what constitutes Massachusetts- sourced income in order to tax earnings for work performed entirely outside its borders,” New Hampshire Attorney General Gordon Macdonald fumed earlier this week in the state’s latest submission to the Supreme Court.  “This does not maintain the status quo. It upends it,” Macdonald said.

I am sympathetic with New Hampshire, and other states.  Yes, when their residents are using Massachusetts roads to commute to work, and have access to Massachusetts Police, Fire, and Medical aid, then they should pay Mass Taxes.  However, when their benefits are limited to fire protection for a server in Boston, then their tax liability should not extend to their whole salary.  The Police, Fire and Medical aid to which they will turn is in their own state.

Regards  —  Cliff