Remote Work and State Taxes: The Majority-Minority Rules and the “Convenience of the Employer” Rule

Remote Work and State Taxes

When a person lives in one state and works remotely for an employer in another, how that income is taxed depends on whether the states involved follow the Majority Rule or the Minority Rule (also known as the Convenience of the Employer Rule).

1. Majority Rule – Taxed Where You Physically Work

Most states use the physical work location to decide where your income is taxed.

That means you pay income tax to the state where you actually perform the work, not where your employer’s office is.

Example:

You live and work from home in Arizona for a company based in California → You pay Arizona tax, because that’s where you physically work.

2. Minority Rule – The “Convenience of the Employer” Rule

A few states—Arkansas, Delaware, Nebraska, New York, and Pennsylvania—use a different standard.

Under the Convenience of the Employer Rule, income is considered earned in the employer’s state unless the remote work is done out of necessity for the employer rather than for the employee’s personal convenience.

In other words, you’ll owe tax to the employer’s state even if you never step foot there—unless you can show your employer required you to work remotely.

Example:

You live in New Jersey and work remotely for a New York company.

• If working from home is your choice → New York taxes your income.

• If your employer requires remote work (e.g., no office space or job duties tied to your location) → New Jersey taxes your income.

3. State-Specific Highlights

• New York: Strictly enforces this rule; almost all remote workers are taxed as if working in New York.

• Delaware, Arkansas, Nebraska, and Pennsylvania: Apply similar logic, but enforcement details vary.

• Pennsylvania: Does not allow residents to claim a credit for Pennsylvania-sourced income taxed by another state.

4. Avoiding or Reducing Double Taxation

If you live in one state and your employer is in a “convenience rule” state, both states may tax the same income.

To reduce double taxation:

1. File a non-resident return in your employer’s state.

2. File a resident return in your home state.

3. Claim a credit in your home state for taxes paid to the employer’s state (if allowed).

Most states offer such credits, but exceptions (like Pennsylvania) exist.

None of the “convenience rule” states have reciprocal agreements, which normally simplify this issue.

5. Documenting Employer Necessity

If you work remotely because your employer requires it, document that clearly:

• Company policy or written directive

• Job description showing duties tied to your location

• Communication proving remote work is not for your convenience

This documentation can help you challenge taxation under the “convenience” rule if audited.

Remote Work and State Taxes

6. Legal and Federal Context

Court cases, such as Zelinsky v. Tax Appeals Tribunal, have upheld New York’s enforcement of this rule, confirming states’ authority to tax remote income this way.

At the federal level, the IRS taxes total income regardless of state, but state-to-state differences cause most double-taxation issues.

The South Dakota v. Wayfair case, while focused on sales tax, illustrates how states assert taxing power based on economic presence rather than physical presence.

7. Summary Remote Work and State Taxes

• Majority Rule: You’re taxed where you work (physical location).

• Minority Rule / Convenience Rule: You’re taxed where your employer’s office is, unless your employer requiresyou to work elsewhere.

• To avoid double taxation: File in both states, claim credits where allowed, and document employer necessity for remote work.