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New Hampshire Sues Massachusetts Over Remote Income Taxes

New Hampshire Sues Massachusetts Over Remote Income Taxes
Stateline Oct19
Commuters board a train in New Hampshire headed for Massachusetts jobs pre-pandemic. New Hampshire is taking Massachusetts to the U.S. Supreme Court over a Bay State tax rule for remote workers.
Tim Boyd/The Associated Press

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New Hampshire filed suit in the U.S. Supreme Court seeking to stop Massachusetts from collecting income taxes from New Hampshire residents who are no longer commuting into the Bay State for work.

New Hampshire Gov. Chris Sununu, a Republican, said at a news conference in Concord that Massachusetts’ temporary rule to impose income taxes for out-of-state workers is an “unconstitutional overreach. Massachusetts cannot balance its budget on the backs of our citizens and punish workers from making the decision to work at home and keep themselves and their families and those around them safe.”

But Patrick Marvin, spokesperson for the Massachusetts Executive Office for Administration and Finance, said his state isn’t doing anything new or different by continuing to assess income taxes from employees of Massachusetts companies.

“The Commonwealth has implemented temporary regulations that are similar to those adopted by other New England states,” he said in an email. “The Administration does not comment on pending lawsuits.”

Many states do assess income taxes on employees who work remotely, but most of those states, such as Connecticut, have reciprocal agreements that mean they don’t impose their own income taxes on top of the other state’s income taxes for remote workers.

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“The nature of work is changing.”

With so many people working remotely, and projections that many will continue to do so even after the end of the coronavirus shutdowns, taxing people who work from their homes in a state where their employer is not located has gained increased attention of state tax departments and attorneys.

The Massachusetts tax rule lasts until the end of 2020 or 90 days after the end of the state of emergency over the pandemic, whichever comes first. Six other states — Arkansas, Connecticut, Delaware, Nebraska, New York and Pennsylvania — have permanent rules that predate the pandemic.

Sununu said if his state is successful in the lawsuit, he wants New Hampshire workers to get refunds of the taxes withheld, retroactively. 

Decisions in previous lawsuits have not taken New Hampshire’s side. New York’s application of its income tax to out-of-state workers was tested in a 2003 case by Edward Zelinsky, who lives in Connecticut but works as a law professor at Yeshiva University’s Cardozo School of Law in New York. Zelinsky argued he should pay New York income tax on only half of his earnings, because he spends half his teaching and research time in New York and half at home in Connecticut.

But the New York Court of Appeals, the state’s highest court, ruled Zelinsky owed New York income tax on his entire salary. The U.S. Supreme Court declined to hear the case.

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