My temporary-staffing employees work back-to-back assignments in different states -- some inside New York's Metropolitan Commuter Transportation District, some outside. How do I figure out which of their wages count toward my MCTMT payroll expense?

Plain-English summary

A temporary staffing company with offices in fourteen states asked how to determine, for MCTMT purposes, which of its "billable" employees' wages count toward its payroll expense when those employees move between distinct, sequential assignments in different states. The company posed two mirror-image examples: Employee 1, a New York resident managed from a New York office, worked seven months entirely on a New York assignment (inside the MCTD) and then five months entirely on a Georgia assignment; Employee 2, a Georgia resident, had the reverse pattern.

New York's MCTMT (Tax Law § 801) taxes employers based on the payroll expense of their "covered employees" — those "employed within" the MCTD (the counties comprising New York City plus Rockland, Nassau, Suffolk, Orange, Putnam, Dutchess, and Westchester). Whether an employee is "covered" is determined by a four-part test borrowed from the state's wage-reporting-system regulations (20 NYCRR § 2380.3), applied in strict order — as soon as one test resolves the question, the analysis stops:

1. Localization — are the employee's services performed entirely (or almost entirely, with only incidental out-of-district work) within the MCTD?
2. Base of operations — if not localized, is the employee's base of operations (where they customarily return for instructions, supplies, repairs) within the MCTD?
3. Place of direction and control — if there's no single base of operations, does direction and control emanate only from the MCTD, with some services performed there?
4. Residence — if none of the above resolve it, does the employee reside in the MCTD and perform some services there?

If any test places the employee in the MCTD, all of that employee's payroll expense for the period counts — employers cannot split a single ongoing assignment's wages between in-MCTD and out-of-MCTD portions. But the Department drew a key distinction here: the "no splitting" rule applies to an employee working at multiple locations during one assignment, not to genuinely separate, sequential assignments. Because each employee's Georgia and New York stints were distinct assignments that started and ended cleanly, the Department evaluated each assignment on its own. Applying the localization test alone resolved both employees' MCTD assignments (100% performed in the MCTD → covered) and their out-of-state assignments (0% performed in the MCTD → not covered, and none of the later tests changed that outcome either, since neither employee had a base of operations, direction/control emanated from wherever they were physically working, and residence didn't independently establish MCTD coverage for the out-of-state stretch).

What this means for you

Staffing agencies and multi-state employers

Track each employee's distinct, sequential assignments separately rather than netting an employee's wages for the whole quarter. If an assignment is performed entirely within the MCTD, all of that assignment's wages are covered payroll expense; if entirely outside, none are — apply the four tests in order to each assignment and stop at the first one that resolves it.

Payroll and accounting professionals computing MCTMT liability

Remember the ordering: localization first, then base of operations (only if the employee genuinely lacks one, this test is skipped), then direction/control, then residence as the last resort. Don't skip straight to residence — an out-of-state assignment can still be non-covered even for a New York resident if direction/control and base of operations point elsewhere for that period.

Common questions

Q: Can I split one employee's wages for a single ongoing assignment between MCTD and non-MCTD portions?
A: No. If a single assignment is covered under any of the four tests, the employer must include 100% of that assignment's payroll expense — there's no pro-rating within one assignment.

Q: What if the employee has two separate, back-to-back assignments in different places?
A: Each distinct assignment is tested independently. Wages from the MCTD assignment are covered; wages from the non-MCTD assignment are not, even for the same employee in the same reporting quarter.

Q: Does an employee's home state or residence control the outcome?
A: Only as a last resort. Residence is the fourth and final test, used only if localization, base of operations, and direction/control all fail to resolve the allocation.

Q: Can I rely on this ruling for my own staffing arrangements?
A: No. This advisory opinion binds the Department only as to the petitioner and the specific facts described.

Citations and references

Statutes and regulations:

• Tax Law § 800(b) (MCTMT "employer" definition: subject to § 671 withholding, payroll expense over threshold)
• Tax Law § 800(d) ("covered employee" definition: employed within the MCTD)
• Tax Law § 801(a) (MCTMT imposed on employers engaged in business within the MCTD)
• Tax Law § 801(c) (borrows wage-reporting-system allocation rules, substituting MCTD for the state)
• Tax Law § 804(a) (quarterly MCTMT remittance)
• 20 NYCRR § 2380.3(c)(1)(i)-(iv) (four-part test: localization, base of operations, direction and control, residence)
• Public Authorities Law § 1262 (MCTD counties)
• TSB-M-09(1)MCTMT (Department guidance applying the four-part test to MCTMT)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/mctmt_ao.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/mctmt/a11_1mctmt.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-11(1)MCTMT
Metropolitan Commuter
Transportation Mobility Tax
July 21, 2011

Office of Counsel
Advisory Opinion Unit

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. M100108A

The Department of Taxation and Finance received a Petition for Advisory Opinion from
name and addess redacted. Petitioner asks under which circumstances compensation paid to its
employees is subject to the Metropolitan Commuter Transportation Mobility Tax (MCTMT).
We conclude that, in the Petitioner’s case of temporary staffing assignments when
“billable” employees perform distinct, consecutive job assignments for the same employer, the
determination as to whether an employee is a covered employee whose wages are included in the
employer’s payroll expense when calculating the employer’s MCTMT liability should be
determined separately for each of the employee’s assignments. Therefore, Employee 1 and
Employee 2 are considered covered employees under the MCTMT for the duration of their
assignments within the Metropolitan Commuter Transportation District (MCTD) because their
services were performed entirely within the MCTD during this period. However, Employee 1
and Employee 2 should not be considered covered employees under the MCTMT for their
assignments outside the MCTD because they did not perform any services in the MCTD during
this period and therefore, do not meet the tests for covered employment during their assignments
outside of the MCTD.
Facts
Name redacted, a corporation headquartered in City and State redacted1, provides
temporary staffing services to clients throughout the country in fields including health care,
information technology, and telecommunications. It has thirty offices in fourteen states.
Although Petitioner has approximately 620 full-time permanent employees (“non-billable
employees”) who provide back-office support and administrative services, the vast majority of
its employees are “billable employees” who work on temporary assignments for Petitioner’s
customers. “Billable” employees are paid only for the time they actually work, although they can
accrue paid vacation time. These billable employees do not report to the Petitioner’s offices at
any time. They only report to their temporary work assignments, located wherever Petitioner’s
clients happen to be located. Billable employees’ job assignments come from the Petitioner’s
various offices, and personnel and payroll records for billable employees are maintained at the
Petitioner’s offices. Usually, but not always, billable employees are managed from one of the
Petitioner’s offices located in the employee’s home state. The billable employees’ assignments
may or may not be in the employee’s home state.

1

For purposes of the AO, we assume all New York locations are within the MCTD.

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TSB-A-11(1)MCTMT
Metropolitan Commuter
Transportation Mobility Tax
July 21, 2011

Petitioner asks whether the MCTMT would be applicable in two different factual
situations. In the first situation, Employee 1 resides in New York State and receives his
temporary work assignments from a name redacted office located in New York State. During the
first seven months of 2009 (i.e., January 1 – July 31), Employee 1 was assigned to a project that
required him to work from a customer location within New York State. At the conclusion of the
seven month assignment, Name redacted, through its New York office, contracted with a
New York State customer to provide temporary employee services to the customer at the
customer’s Georgia location. The assignment was for five months (i.e., August 1 – December 31)
and all services were performed in Georgia. Employee 1 was assigned to fulfill the contract and
traveled to Georgia where he remained until the contract was fulfilled. Employee 1 was under the
direct daily supervision of the customer but was ultimately managed by the name redacted office
in New York. Upon completion of the contract, Employee 1 returned to New York. In the second
situation, the states are reversed but the other facts are identical: Employee 2 resides in Georgia,
receives his work assignments from one of Petitioner’s offices located in Georgia, and after a
seven month assignment for a customer in Georgia, is assigned to a five month project at the
customer’s New York location, while still being managed by the Petitioner’s Georgia office.
Analysis
Tax Law § 801 imposes a tax on employers “who engage in business within” the
Metropolitan Commuter Transportation District. Tax Law § 801 (a). The MCTD includes all the
counties of New York City as well as the counties of Rockland, Nassau, Suffolk, Orange,
Putnam, Dutchess, and Westchester. Public Authorities Law § 1262. These employers are subject
to the MCTMT based on the payroll expense for all of their covered employees.
For purposes of the MCTMT, employers are defined as those who are subject to
withholding tax under Tax Law § 671 and have a payroll expense in excess of $2,500 in any
calendar quarter.2 Tax Law § 800 (b). Employers are responsible for remitting MCTMT on a
quarterly basis. Tax Law § 804 (a).
“Covered employees” are defined as an employee who is employed within the MCTD.
Tax Law § 800 (d). Whether an employee is a “covered employee” for purposes of the MCTMT
is determined by “utilizing the rules applicable to the jurisdiction of employment for purposes of
the statewide wage reporting system. . . and substituting the MCTD for the state in that
application.” Tax Law § 801 (c). These rules consist of a four-part test found in Section 2380.3
of the Wage Reporting System Regulations. 20 NYCRR § 2380.3. The application of this
four-part test for MCTMT purposes is described in TSB-M-09(1) MCTMT, Metropolitan
Commuter Transportation Mobility Tax.
Applying these regulations in the manner prescribed by the TSB-M, employees are
considered to be covered employees if the employees’ services are allocated to the MCTD. To
2

While certain employers, including the United Nations, agencies or instrumentalities of the United States, and
interstate agencies or public corporations created pursuant to an agreement with other states or Canada are not
subject to the MCTMT, Petitioner does not qualify under any of these exceptions.

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TSB-A-11(1)MCTMT
Metropolitan Commuter
Transportation Mobility Tax
July 21, 2011

determine if the employees’ services are allocated to the MCTD, the test considers the following
factors, in order: localization; base of operations; place of direction and control; and residence.
These tests can be found in 20 NYCRR § 2380.3 (c), except that the MCTD is substituted for the
state as a whole. For the MCTMT, the tests are conducted in order, and if the application of one
test results in an employee’s services being allocated to the MCTD, the analysis stops and no
additional tests are used. TSB-M-09(1) MCTMT at 3. Otherwise, employers must proceed to the
next succeeding test. Id.
The first test in evaluating whether an employee’s services are allocated to the MCTD is
the localization test. According to regulations, employment includes all services performed if the
services are localized in New York State. 20 NYCRR § 2380.3 (c)(1)(i). Services are allocated to
the MCTD if the services are localized there. TSB-M-09(1) MCTMT at 2. Services are deemed
localized within the MCTD if they are either performed entirely within the MCTD or are
performed both in and out of the MCTD, but those performed outside the MCTD are incidental
to the employee’s services performed within the MCTD (for example, the services are temporary
or transitory in nature or consist of isolated transactions.) Id.
If the employee’s services are not localized in the MCTD, the second test, the base of
operations test, is applied. An employee’s services are allocated to a region if the employee’s
base of operations is in the region. 20 NYCRR § 2380.3 (c)(1)(ii). However, this test cannot be
applied if the employee has no base of operations, or has more than one base of operations.
Although “base of operations” is not defined in the Wage Reporting System regulations,
according to the TSB-M, base of operations means the place at which the employee is not
continuously located, but from which the employee customarily starts out to perform his or her
functions in or out of the MCTD. . . . where the employee customarily returns in order to receive
instructions from his or her employer, communications from other persons, or to replenish stock
and materials, to repair equipment used, or to perform any other function necessary in the
exercise of his or her trade or profession.” TSB-M-09(1) MCTMT at 3. Therefore, all services
are allocated to the MCTD if the employee’s base of operations is in the MCTD.
If the first two tests do not result in the employee’s services being allocated to the
MCTD, the third test, the place of direction and control test, is used. In order for the employee’s
services to be allocated to a region under this test, the direction and control must emanate from
only the region, and the employee must perform some services within the region. 20 NYCRR
§ 2380.3 (c)(1)(iii). “Direction and control” is not defined in the Wage Reporting System
Regulations, but it is described in the TSB-M as “the place from which the employer directs and
controls the activities of the employees. It is not necessarily the location of the principal office,
but rather the point from which basic authority over the supervision of services emanates (for
example, the place from which job assignments are made and/or instructions are issued, or the
place at which personnel and payroll records are maintained.)” TSB-M-09(1) MCTMT at 3.
Therefore, if the direction and control emanates only from the MCTD and some services are
performed within the MCTD, than all services are allocated to the MCTD.

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TSB-A-11(1)MCTMT
Metropolitan Commuter
Transportation Mobility Tax
July 21, 2011

Finally, if the first three tests do not result in an allocation of the employee’s services to
the MCTD, the fourth test, residence, is used. The Wage Reporting System Regulations find that
this test is satisfied when “the person’s residence is in this State and some part of the services are
performed in this State.” 20 NYCRR § 2380.3 (c)(1)(iv). Here, according to the TSB-M, “all of
the employee’s services are allocated to the MCTD if the employee resides in the MCTD and
performs some services in the MCTD.” TSB-M-09(1) MCTMT at 3.
If an employee is found to be a covered employee, all of the employee’s payroll expense
for the quarter is subject to the MCTMT. Id. According to the TSB, “An employer cannot
allocate payroll expenses for covered employees who work both in and out of the MCTD for
purposes of MCTMT.” Id. Publication 420, Guide to the Metropolitan Commuter Transportation
Mobility Tax, further refines the rule: “If an employee is considered a covered employee, then all
of the payroll expense for that employee (for the time the employee is or was considered a
covered employee) [emphasis added] is included in the payroll expense for purposes of the
MCTMT.” Guide to the Metropolitan Commuter Transportation Mobility Tax 9.
From the facts presented, Petitioner is an employer for MCTMT purposes. Therefore, the
four-part test described above must be used to determine which employees are covered
employees whose wages are included in the employer’s payroll expense for the purposes of
calculating MCTMT. For purposes of the MCTMT, employers are not allowed to allocate
payroll expenses for employees who work both inside and outside the MCTD. However, that
prohibition applies only to employees who work at multiple locations over the course of one
assignment. In Petitioner’s case, each employee had two distinct, consecutive assignments, each
in a different location. Each employee’s first assignment came to an end before the second
assignment began. Therefore, in determining covered employment for these billable employees,
each assignment will be considered separately.
Applying the localization test to Employee 1 and Employee 2’s New York assignments, it
is clear that the employees’ services are allocated to the MCTD. During Employee 1’s seven
month contract and Employee 2’s five month contract, all of the employees’ services were
performed within the MCTD. Therefore, no further tests are necessary for the employees’
New York assignments. Employees 1 and 2 are considered covered employees for the period of
their New York assignments.
However, for Employee 1 and Employee 2’s Georgia assignments, the localization test
does not result in the employees’ services being allocated to the MCTD. For their Georgia
assignments, the employees did not perform any services within the MCTD. Therefore, it is
necessary to move to the next test in the four-part test to evaluate the employees’ Georgia
assignments.
The base of operations test applied to Employee 1 and Employee 2’s Georgia
assignments results in neither of the employees’ services being allocated to the MCTD. Neither
Employee 1 nor Employee 2 has a physical base of operations. They never report to the
Petitioner’s office, only to the location of their temporary work assignments.

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TSB-A-11(1)MCTMT
Metropolitan Commuter
Transportation Mobility Tax
July 21, 2011

Therefore, the place of direction and control test must be applied. Under this test, the
employees’ services will be allocated to the MCTD if they have performed some services within
the MCTD and their “direction and control emanates from only the MCTD. . .” TSB-M09(1)MCTMT at 3. During their Georgia assignments, both Employee 1 and Employee 2
performed all of their services in Georgia, outside the MCTD. Therefore, their services would
not be allocated to the MCTD under this test.
As a result, the residence test must be applied for Employee 1 and Employee 2 to
determine whether their services are allocated to the MCTD during their Georgia assignments.
Under the residence test, “the employee’s services are allocated to the MCTD if the employee
resides in the MCTD and performs some services in the MCTD.” TSB-M-09(1)MCTMT at 3.
Since neither employee performed any services in the MCTD during their Georgia assignments,
neither employees’ services would be allocated to the MCTD using this test.
Therefore, Employee 1 and 2 are not considered covered employees for the period of the
Georgia assignments. When Petitioner is computing its payroll expense, it must include the
payroll expense for Employee 1 and Employee 2 that is associated with their New York
assignments, but should not include the payroll expense associated with the Georgia
assignments. In other words, wages for Employee 1 for the period January 1 through July 31,
2009 are subject to the MCTMT. Wages for Employee 2 for the period August 1 through
December 31, 2009 are subject to the MCTMT. Because the dates on which the employees’
assignments terminated and their new assignments began fall in the middle of the reporting
period,3 only the wages that the employees earned while they were covered employees are
included in calculating the MCTMT.

DATED: July 21, 2011

NOTE:

3

/S/
DEBORAH LIEBMAN
Deputy Counsel

An Advisory Opinion is issued at the request of a person or entity. It is limited to the
facts set forth therein and is binding on the Department only with respect to the
person or entity to whom it is issued and only if the person or entity fully and
accurately describes all relevant facts. An Advisory Opinion is based on the law,
regulations, and Department policies in effect as of the date the Opinion is issued or
for the specific time period at issue in the Opinion.

While generally the reporting period for MCTMT is the calendar quarter, as specified in Tax Law § 804, in 2009,
when the MCTMT was first instituted, most taxpayers were required to file returns for the period March 1, 2009
through September 30, 2009.