Work Remotely, Pay Tax . . . Locally? Saying No to Massachusetts

Caroline Kupiec and David Nagle co-wrote the article, "Work Remotely, Pay Tax . . . Locally? Saying No to Massachusetts," published by Tax Notes.

In the article, Caroline and Dave explain how nonresident employees can claim refunds if Massachusetts’ taxation of remote workers is found unconstitutional.

We're able to provide the first few paragraphs from the article. The remainder of the article is available through Tax Notes.

By order on January 25 the Supreme Court invited the acting solicitor general to file a brief expressing the views of the United States in New Hampshire’s suit against Massachusetts.[1] The central issue in the case, according to New Hampshire, is whether 'Massachusetts may tax New Hampshire residents for work performed entirely within New Hampshire simply because those individuals once commuted to Massachusetts for work.'[2] At stake is the constitutional scope of state power to tax nonresidents based on the source of their income. The Court’s recent order is just one milestone on what will likely be a long path.

Nonresident employees working remotely may not have set foot in Massachusetts for the better part of 2020. Yet their employers may have withheld and remitted personal income tax on their behalf as required by the regulation that governs the Massachusetts-source income of nonresidents telecommuting due to the COVID-19 pandemic.[3]

As the 2020 individual income tax return filing season begins, New Hampshire residents who have been working in New Hampshire during the pandemic should start taking steps to protect any rights to refunds that may arise if the pandemic sourcing rule is ultimately found unconstitutional. The same may be true for nonresident employees from other states that impose no income tax on compensation or deny credit for tax paid to Massachusetts pursuant to the pandemic sourcing rule.

[1] See New Hampshire v. Massachusetts, S. Ct. Docket No. 22O154 (docketed Oct. 23, 2020).

[2] Reply Brief in Support of Motion for Leave to File Bill of Complaint, 3, New Hampshire v. Massachusetts (Dec. 22, 2020).

[3] “Massachusetts Source Income of Non-Residents Telecommuting Due to the COVID-19 Pandemic,” 830 Mass. Code Regs. 62.5A.3 (as most recently proposed Dec. 8, 2020).