The U.S. Supreme Court declined to take up a lawsuit filed by New Hampshire against Massachusetts over the taxing of workers forced to work from home during the pandemic.
New Hampshire, which does not have an income tax, balked at Massachusetts continuing to tax New Hampshire residents who are employed by Massachusetts companies but working from home during the pandemic.
Connecticut filed an amicus brief in the case on the side of New Hampshire, arguing that Connecticut residents shouldn’t be taxed upwards of $400 million by New York when they are living and working in Connecticut.
New Hampshire argued that such taxation was unconstitutional and urged the Supreme Court to take the case, which could have had far-reaching implications, particularly in the Northeast.
Normally, employee salaries are taxed based on the state where their work is performed, rather than where they live, known as the “convenience of the employer rule,” and are given a tax credit in their home state.
However, during the pandemic, employees worked from home raising the possibility that they could be taxed by both states.
During the 2021 legislative session, the General Assembly passed a law ensuring former out-of-state commuters would not be subject to double taxation and would continue paying taxes based on their employer’s home state as they waited to see whether or not the Supreme Court would act.
President Joe Biden’s administration filed a brief siding with Massachusetts and urging the Supreme Court not to take up the matter due to its temporary, pandemic-related nature.
Massachusetts also argued the taxation was only temporary and will sunset following Gov. Charlie Baker’s declaration of an end to Massachusetts’ state of emergency.
However, the trend of telecommuting will likely outlive the pandemic and could create similar issues in the future as many experts expect the telecommuting to continue.
Although the highest court passed on taking up New Hampshire’s case, Justices Clarence Thomas and Samuel Alito said the court should have taken the case.