If I move my home and domicile out of New York but keep working for my New York-based employer from my new state, is my pay still taxed as New York-source income?

Plain-English summary

Petitioner, the accounting firm Lopez Edwards Frank & Co., LLP, asked whether wages remain New York-source income for an employee who continues working for the same New York-based employer after moving out of state. The employee at issue was a stockbroker for a major New York City brokerage house who had worked in the employer's office and lived in Westchester County. He planned to sell his residence around March 1, 1999 and move to Wyoming around June 1, 1999. Because his employer had no nearby Wyoming office, he would work out of his new home there, communicating with the New York office and his customers by telephone and fax. He did not intend to return to the New York office at all, and would not perform services for his employer within New York State after the move. Petitioner asked the Department to assume that the employee had effectively changed his domicile to Wyoming, and that working from his Wyoming home was for his own convenience, not because his employer required him to be located there.

The Department held that once the individual moved to and changed his domicile to Wyoming, he became a nonresident of New York. Under Tax Law § 601(e), a nonresident is taxed only on New York-source income. Tax Law § 631(a) and § 631(b)(1)(B) source income to New York when it is attributable to a trade, business, profession, or occupation carried on in New York State, and 20 NYCRR § 132.4(b) makes clear that a nonresident employee's compensation is included in New York income only to the extent services were actually rendered within New York State - compensation for services performed wholly outside New York is excluded even if paid from a New York source or by a New York employer. Citing Linsley v. Gallman (an executive who retired to Connecticut and thereafter performed no services and maintained no office in New York was not taxable on his post-retirement advisory income, even though he remained available for telephone consultation) and Matter of Hayes v. State Tax Commn, the Department concluded that because the employee would not return to the New York office and would perform no services for his employer within New York State after his move, his post-move employment income would not constitute income from New York sources, and he would not be subject to New York personal income tax under Article 22 on that income after the June 1, 1999 change of domicile.

What this means for you

NY employers with employees relocating out of state

When an employee who has genuinely relocated - changed domicile, sold the New York residence, and stopped performing any services connected to New York - continues on your payroll from a new home state, this opinion supports treating that employee's post-move wages as no longer New York-source income for personal income tax purposes, even though your business remains based in New York and payments continue to originate from your New York office. The key facts the Department relied on were the completed change of domicile and the total absence of any services rendered within New York after the move.

Individuals moving out of New York while keeping their NY-based job

If you move out of New York, effectively change your domicile, and thereafter perform no work for your employer within New York State, your wages earned after the move are not automatically New York-source income simply because your employer and paycheck remain New York-based. This opinion turns specifically on the employee having fully relocated and stopped providing any employer services connected to New York - it is not a general ruling on telecommuting while still based in New York. The facts here were also expressly assumed to involve the employee choosing to work from his new home for his own convenience rather than because his employer required it; New York's "convenience of the employer" doctrine can pull a telecommuter's income back into New York source income where the employee still maintains a New York base and works from home for personal convenience while remaining connected to a New York office. Anyone in a partial-relocation or ongoing-telecommuting situation, rather than a clean, completed move with zero New York services, should not assume this ruling's favorable result applies to them.

Common questions

Q: Does an employee stop owing New York income tax on wages just by moving out of state?
A: Not automatically. In this opinion, the favorable result depended on the individual having effectively changed his domicile to Wyoming, no longer working in or reporting to the New York office, and performing no services for his employer within New York State after the move. Tax Law § 601(e) taxes a nonresident only on income derived from New York sources, and here the Department found no New York-source income remained once those facts were established.

Q: Does it matter that the employer is based in New York and pays the employee from New York?
A: No. Under 20 NYCRR § 132.4(b), compensation for services rendered by a nonresident wholly outside New York is excluded from New York income "regardless of the fact that payment may be made from a point within New York State or that the employer is a resident individual, partnership or corporation."

Q: What if the employee still communicates with the New York office by phone and fax?
A: The opinion treats that as insufficient to create New York-source income. The stockbroker was expected to communicate with the New York office and his customers by telephone and fax after his move, and the Department still concluded his income would not be New York-source, consistent with Linsley v. Gallman, where the taxpayer remained available for telephone consultation from Connecticut without being taxed on that income.

Q: Would the answer be different if the employee were working from home for the employer's necessity rather than his own convenience?
A: The opinion expressly assumes the Wyoming work arrangement was for the employee's convenience and not because of business necessity, and it does not analyze how a necessity-based telecommuting arrangement would be treated. The ruling's holding rests on the fact that the employee had fully relocated and rendered no services connected to New York, not on why he chose to work from home.

Q: Is this the same as New York's rule for people who telecommute from home while still based in New York?
A: No. This opinion addresses a complete relocation - a change of domicile out of New York combined with the total cessation of services rendered within New York. It does not address, and should not be read to control, the more common telecommuter scenario where someone works from a home office while remaining domiciled in or closely tied to New York.

Q: What authorities did the Department rely on for this conclusion?
A: Tax Law § 601(e), § 631(a), and § 631(b)(1)(B), 20 NYCRR § 132.4(b), and the case law in Linsley v. Gallman, 38 AD2d 367, affd 33 NY2d 863, and Matter of Hayes v. State Tax Commn, 61 AD2d 62.

Citations and references

• Tax Law § 601(e) - imposes New York personal income tax on a nonresident individual's taxable income derived from New York sources, computed as if a resident and apportioned by the New York source fraction
• Tax Law § 631(a) - New York source income of a nonresident includes items of income, gain, loss, and deduction derived from or connected with New York sources
• Tax Law § 631(b)(1)(B) - New York source income includes items attributable to a business, trade, profession, or occupation carried on in New York State
• 20 NYCRR § 132.4(b) - a nonresident employee's New York adjusted gross income includes compensation only to the extent services were rendered within New York State; compensation for services rendered wholly outside New York is excluded regardless of where payment originates or where the employer is based
• Linsley v. Gallman, 38 AD2d 367, affd 33 NY2d 863 - a retired New York executive who moved to Connecticut and performed no services and maintained no office in New York was not taxable on his post-retirement advisory income
• Matter of Hayes v. State Tax Commn, 61 AD2d 62 - cited alongside Linsley in support of the same sourcing principle

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/income_ao_1999.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/income/a99_4i.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-99(4)I
Income Tax
June 30, 1999

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. I990226D

On February 26, 1999, a Petition for Advisory Opinion was received from Lopez Edwards
Frank & Co., LLP, 70E Sunrise Highway, Valley Stream, New York 11582-0547.
The issue raised by Petitioner, Lopez Edwards Frank & Co., LLP, is whether certain wages
are deemed to be from New York sources where an individual continues to be employed by his New
York based employer after his move to Wyoming.
Petitioner submits the following facts as the basis for this Advisory Opinion.
An individual, a stock broker employed by one of the major brokerage houses based in New
York City, worked in his employer's office and resided in Westchester County at the time the
Petition was submitted. Petitioner indicated that the individual intended to sell his residence on or
about March 1, 1999 and move to Wyoming on or about June 1, 1999.
The individual's employer does not have an office nearby, in Wyoming, from which he can
work. Thus, he will be working out of his new home. He is not planning to return to the New York
office at all after his move and will not perform services for his employer within New York State.
He will communicate by telephone and fax with the New York office and with his customers.
Assume for purposes of this question that he has effectively changed his domicile to
Wyoming. Further assume that the use of his Wyoming home is for his convenience, and not a
change in location out of business necessity.
Discussion
Section 601(e) of the Tax Law imposes a personal income tax for each taxable year on a
nonresident individual's taxable income which is derived from sources in New York State. The tax
is computed as if the individual were a resident, reduced by certain credits, and apportioned to New
York by the New York source fraction, the numerator of which is the individual's New York source
income and the denominator of which is the individual's New York adjusted gross income.
Section 631(a) of the Tax Law provides that the New York source income of a nonresident
individual includes the net amount of items of income, gain, loss and deduction entering into the
individual's federal adjusted gross income derived from or connected with New York sources.

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TSB-A-99(4)I
Income Tax
June 30, 1999

Section 631(b)(1)(B) of the Tax Law provides that items of income, gain, loss and deduction
derived from or connected with New York sources include those items attributable to a business,
trade, profession or occupation carried on in New York State.
Section 132.4(b) of the Personal Income Tax Regulations provides that:
[t]he New York adjusted gross income of a nonresident individual rendering
personal services as an employee includes the compensation for personal services
entering into [the individual's] Federal adjusted gross income, but only if, and to the
extent that, [the individual's] services were rendered within New York State.
Compensation for personal services rendered by a nonresident individual wholly
without New York State is not included in [the individual's] New York adjusted
gross income, regardless of the fact that payment may be made from a point within
New York State or that the employer is a resident individual, partnership or
corporation. Where the personal services are performed within and without New
York State, the portion of the compensation attributable to the services performed
within New York State must be determined in accordance with sections 132.16
through 132.18 of this Part. (emphasis added)
In the Matter of Linsley v Gallman, 38 AD2d 367, affd 33 NY2d 863, the petitioner retired
from his position as an executive of a New York investment banking corporation, because of poor
health, and moved to Connecticut. He and the corporation entered into an agreement under which
he was to perform advisory services for it for five years following his retirement. While he did not
have to come into New York, he was available for telephone consultation. The Court held that since
he performed no services in New York for the income in question and did not maintain an office or
place of business in New York, the income was not received from a source in New York. (See also,
Matter of Hayes v State Tax Commn, 61 AD2d 62.)
In this case, the individual is a stock broker employed by a major brokerage house based in
New York and worked in his employer's New York office. It is assumed that the individual moved
to Wyoming and changed his domicile to Wyoming on or about June 1, 1999. The individual will
work out of his home in Wyoming, and will communicate with the New York office and his
customers by telephone and fax. Petitioner states that the individual will do this for his convenience,
not out of necessity for his employer.
When the individual moved to and changed his domicile to Wyoming on or about June 1,
1999, the individual became a nonresident of New York. The individual will not return to the New
York office after he moved to and changed his domicile to Wyoming and will not perform any
services for his employer within New York State after such change. Accordingly, pursuant to
Linsley, supra, after the individual moved to and changed his domicile to Wyoming, the individual's

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TSB-A-99(4)I
Income Tax
June 30, 1999

income related to such employment, pursuant to section 631(b)(1)(B) of the Tax Law and section
132.4(b) of the Personal Income Tax Regulations, will not constitute income from New York
sources. Further, pursuant to section 601(e) of the Tax Law, such employment will not make the
individual subject to New York State personal income tax under Article 22 of the Tax Law after he
moved to and changed his domicile to Wyoming on or about June 1, 1999.

DATED: June 30, 1999

NOTE:

/s/
John W. Bartlett
Deputy Director
Technical Services Bureau

The opinions expressed in Advisory Opinions are
limited to the facts set forth therein.