Remote Work and the State Taxation of Nonresident Employees

46 Pages Posted: 23 Dec 2022 Last revised: 31 Jul 2023

See all articles by Bradley W. Joondeph

Bradley W. Joondeph

Santa Clara University - School of Law

Date Written: December 13, 2022


The onset of the COVID-19 pandemic caused millions of Americans to telecommute across state lines. In response, several states deemed the salaries of employees who had previously worked at workplaces in the state to be “sourced” temporarily to that state. Some rival states contended this was unconstitutionally extraterritorial and sought to file an original complaint at the Supreme Court. Ultimately, the justices declined to hear New Hampshire v. Massachusetts, leaving the issue to be litigated by individual taxpayers.

This article explains why such sourcing rules are constitutional. Those attacking these rules have failed to appreciate the Constitution’s “forgivingness” in state approach-es to the attribution of income. A state’s method for sourcing income need only be “fair” or “rational,” such that it “reasonably reflects the in-state component of the activity being taxed.” Given the indispensable role of employers in generating an employee’s salary—and that the state of the workplace is the labor market into which the employee has sold her services—these rules meet this standard. Indeed, nearly all existing state income-attribution rules are constitutional, including New York’s long-contested “convenience of the employer” regulation, which attributes 100 percent of an employee’s salary to the state of her workplace, except when her employer requires her to work outside the state. The production of income involves the contribution of several activities, so assigning it to a particular location depends on value and policy judgments about the significance of those contributions (and the governmental services supporting those activities). These rules might be controversial as a matter of policy, but there seems little doubt they are rational—and thus constitutional.

Perhaps more important, the judiciary’s deference to these sorts of state judgments abides the Constitution’s deeper norms about the proper judicial role. Exacting judicial review of these types of rules would risk ensnaring the courts in an endless series of problems they lack the institutional competence to solve. The justices have stared into this abyss before, and they have sensibly concluded that the Constitution assigns this responsibility to Congress, not the courts.

Keywords: State and Local Taxation, Commerce Clause, Federalism, Constitutional Law

Suggested Citation

Joondeph, Bradley W., Remote Work and the State Taxation of Nonresident Employees (December 13, 2022). Wisconsin Law Review, Vol. 2023, No. 3, 2023, Santa Clara Univ. Legal Studies Research Paper No. 4300715, Available at SSRN:

Bradley W. Joondeph (Contact Author)

Santa Clara University - School of Law ( email )

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Santa Clara, CA 95053
United States
408-554-4726 (Phone)

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