Determination Form - New York Division Of Tax Appeals (Page 3 of 4) in pdf

of 1999, petitioner paid income tax to Connecticut on the wages earned for this period. Beginning in 2000,

withholding taxes on behalf of petitioner were paid by Winstar to Connecticut.

8. Winstar was liquidated at the end of 2001 and petitioner's employment with the company was terminated. As

a result of the bankruptcy and subsequent liquidation of Winstar, petitioner has been unable to obtain any

company records. Petitioner maintained no travel records for the last quarter of 1999 because in his new

position, no travel was required.

CONCLUSIONS OF LAW

A. Tax Law § 631(a)(1) provides that the New York source income of a nonresident individual shall include,

among other items, the sum of "[t]he net amount of items of income, gain, loss and deduction entering into his

federal adjusted gross

income, as defined in the laws of the United States for the taxable year, derived from or connected with New

York

sources . . . ." A nonresident individual's items of income, gain, loss and deduction derived from or connected

with New York State sources are items, in part, attributable to a business, trade, profession or occupation

carried on in New York State (Tax Law § 631[b][1][B]). Tax Law § 631(c) provides that when a business,

trade, profession or occupation is carried on both within and without the State "the items of income, gain, loss

and deduction derived from or connected with New York sources shall be determined by apportionment and

allocation under such regulations." The regulations pertaining to activities carried on in New York State

additionally provide as follows:

The New York adjusted gross income of a nonresident individual rendering personal services as an

employee includes the compensation for personal services entering into his Federal adjusted gross

income, but only if, and to the extent that, his services were rendered within New York State. . . .

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 (20 NYCRR 132.4[b]).

The regulation set forth at 20 NYCRR 132.18(a) states, in pertinent part, as follows:

If a nonresident employee . . . performs services for his employer both within and without New

York State, his income derived from New York State sources includes that proportion of his total

compensation for services rendered as an employee which the total number of working days

employed within New York State bears to the total number of working days employed both within

and without New York State. The items of gain, loss and deduction . . . of the employee attributable

to his employment, derived from or connected with New York State sources, are similarly

determined. However, any allowance claimed for days worked outside New York State must be

based upon the performance of services which of necessity, as distinguished from convenience,

obligate the employee to out-of-state duties in the service of his employer. . . . (Emphasis added.)

B. It is well settled that an employee's out-of-state services are not performed for an employer's necessity where

the services could have been performed at his employer's office (see, e.g., Matter of Phillips v. New York State

Department of Taxation and Finance, 267 AD2d 927, 700 NYS2d 566, lv denied 94 NY2d 763, 708 NYS2d

52). Further, the courts have held that where there was no evidence that services performed at the taxpayer's

out-of-state home could not have been undertaken at the employer's office in New York, the services were

performed out of state for the employee's convenience, not the employee's necessity (Matter of Page v. State

Tax Commission, 46 AD2d 341, 362 NYS2d 599; Matter of Simms v. Procaccino, 47 AD2d 149, 365 NYS2d

73). The courts have generally upheld a strict standard of employer necessity where the residence is the

workplace in question "because of the obvious potential for abuse" (Matter of Kitman v. State Tax Commn., 92

AD2d 1018, 461 NYS2d 448, 449).

The rationale behind the "convenience of the employer" rule is well established. "Since a New York State

resident would not be entitled to special tax benefits for work done at home, neither should a nonresident who

performs services or maintains an office in New York State." (Matter of Speno v. Gallman, 35 NY2d 256, 259,

Determination Form - New York Division Of Tax Appeals Page 3

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