Source state telecommuter tax laws—such as the one passed by Massachusetts during the pandemic and the “convenience of the employer” rule in New York— are unconstitutional. They violate the dormant Commerce Clause, Due Process Clause, and the Privileges and Immunities Clause. Congress should pass legislation protecting telecommuters from such unconstitutional taxation.

Some definitions are in order. This paper focuses on telecommuters, not mobile workers. Telecommuters (or teleworkers or remote workers) are those “who work[] for an employer in a state they do not live in and lack[] physical presence but earn[] income from their employer in that state.”1 The residence state refers to the state where the telecommuter claims residence and has a physical presence. The source state is the state where the telecommuter’s employer is located—the telecommuter would have a physical presence in this state were they to commute and work in person. When discussing telecommuter tax laws, this paper refers to a tax law enacted by a source state taxing the income of a telecommuter who works from another state (their residence state).

This paper begins by examining an example so the reader can understand the issue at hand. Next, it discusses the tax from the example: the Massachusetts telecommuter tax. It analyzes the constitutional challenges of this tax before proceeding to a similar tax commonly referred to as the “convenience of the employer” rule, such as the one instated in New York. Again, the paper examines the constitutional challenges to this tax. Finally, the paper concludes with a proposed solution for the constitutional issues raised throughout.

Continue reading Taxed from Home: How Post-Pandemic Remote Work Magnifies the Constitutional Issues with Taxing Telecommuters