Got a telecommuter in New Jersey? You still have a tax problem

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Technology moves quickly. Congress, not so much. So as we’ve reported here on GigaOM before, while telecommuting is growing in popularity, the laws regarding the tax obligations of companies that employ remote workers remain murky. Despite stalled efforts by lawmakers to reform the situation, organizations with workers in other states can be on the hook for state taxes in their remote workers’ home states.

The problem was illustrated last year by a case in which a Maryland-based company, TeleBright Software Corp, was ruled to be doing business in New Jersey and liable for state taxes there because the firm employed a single telecommuter in the state. The company appealed the decision and now that ruling is in as well. The result offers no cheer for fans of remote work, as CFO magazine reports:

In the latest ruling of a state court on the issue of nexus — taxation based on location — a New Jersey appeals court held on March 2 that employing a telecommuter in another state subjected Telebright Corp., a Maryland-based software developer, to the N.J. Corporation Business Tax (CBT).

The employee in question in the case developed and wrote software code from a laptop computer in New Jersey… The employee began working for Telebright in Maryland in 2001. But in 2004, she moved to New Jersey. To retain her services, the company allowed her to telecommute full-time from New Jersey. In Telebright Corp., Inc. v. Director of Taxation, a New Jersey Superior Court found that the company was liable for N.J. CBT because of the activities of its lone employee in the state. This month the appeals court upheld that ruling.

Check out the complete article in CFO for more details of the court’s legal reasoning. While it’s clear that cash-strapped states can certainly use all the revenue they can get. It also seems like they could use all the jobs they can get. The clear takeaway here for those not directly responsible for sorting our their organizations’ tax and legal position is clear – it’s past time that congress makes it easier for workers and firms to take advantage of the flexibility technology offers by clarifying their tax obligations. Any day now, guys.

Has your firm run into any tax worries due to telecommuting?

Image courtesy of Flickr user MPD01605.

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