Attention FAE Customers:
Please be aware that NASBA credits are awarded based on whether the events are webcast or in-person, as well as on the number of CPE credits.
Please check the event registration page to see if NASBA credits are being awarded for the programs you select.

Remote Workers Beware: Potential Double Taxation Under the Convenience Rule

Ariele R. Doolittle, Esq.
Published Date:
Nov 1, 2020

As the realities of COVID-19 are setting in, telecommuting arrangements have emerged as part of the new normal. A recent study found that the vast majority of employers plan to allow their employees to work remotely at least part-time and nearly half will allow this full-time going forward.[1] Remote workers utilizing new work locations can trigger state-level income tax consequences, which may include two states seeking to tax the same income.[2] Resident credits can, at least in theory, offset the resulting double tax, but these credits may not be available to taxpayers in states that apply the so-called “convenience rule.” As of now, six states are formally applying some version of the convenience rule: Connecticut, Delaware, Massachusetts, Nebraska, New York, and Pennsylvania (collectively “convenience states”).[3] This list includes some of the most aggressive state tax jurisdictions, so it’s important for tax practitioners to be familiar with the convenience rule.

Before diving into the convenience rule, let’s take a step back and review the basics of state-level personal income taxes on compensation. States that impose income taxes generally tax their residents’ compensation from all sources, but only tax nonresidents’ compensation from in-state sources. This means that compensation received by an individual who lives and works in different states can be subject to tax in both states; however, “the near-universal state practice is to provide credits against personal income taxes for such taxes paid to other States.”[4] As noted above, resident credits should mitigate the double tax, but this is not always the case; other relevant factors include differing tax rates and how the state in question determines workday locations. Indeed, workday location has implications for both nonresidents (when computing the taxable portion of their compensation from in-state sources) and residents (to determine the resident credit). This is where the convenience rule can be important.                                   

Most states actually do not use the convenience rule. Instead, under the standard rule applied in non-convenience states, compensation is generally subject to state income tax only to the extent that the work was actually performed while the employee was physically present in the state. The convenience rule expands that standard rule to say that in-state workdays include not only the days on which the person was physically present in the state, but also days worked out of state unless those workdays were for the necessity of the employer and not for the convenience of the employee. For instance, to determine workday location, New York’s convenience rule states that “any allowance claimed for days worked outside New York 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.”[5] 

The convenience rule is expected to have special significance in 2020. If a remote worker usually lives in one of the convenience states, but has left temporarily due to COVID, the tax consequences can be very harsh. Consider the following example:

Kayla was living and working in New York for several years until COVID arrived. Since then, her employer instructed her to work remotely, so she opted to temporarily hunker down in North Carolina and work remotely from there since COVID rates have been much lower. 

Under these circumstances, North Carolina will tax Kayla’s compensation for the days that she is working in North Carolina.[6] New York will likewise tax all of her compensation since she qualifies as a resident of New York even while temporarily absent.[7] However, New York likely won’t allow Kayla a resident credit to offset the double tax. This is a function of how New York treats workdays under its convenience rule. Indeed, to qualify for New York’s resident credit, the double-taxed income must be “both derived [from] and subject to tax in” the other state. Even though the income was clearly earned by Kayla while she was physically present in North Carolina, it is expected that New York will take the position that Kayla was working in North Carolina for her own convenience—not for the necessity of her employer—and on that basis will deem all of those days to be New York workdays and thus not eligible for New York’s resident credit.  

Perhaps you’re wondering if Kayla can avoid this double tax by simply moving out of New York and into North Carolina. Setting aside the likelihood that this may not be a practical solution for her, the reality is that the tax result would not be much different. If Kayla became a nonresident of North Carolina and continued working remotely from there, New York would continue asserting that her compensation is sourced to and taxable by New York tax under the convenience rule. Because the work was performed by Kayla while physically present in North Carolina, she likely won’t qualify for a resident credit from North Carolina since its resident credit statute, like many states, requires that the income was derived from sources in the other state.[8] 

A similar result would be expected in most of the convenience rule states, with the exception of Connecticut which only applies its convenience rule if the other state is a convenience state.[9] Thus, since North Carolina doesn’t apply the rule, Connecticut would not either. Connecticut is an anomaly in this regard among the other convenience states.

The crux of the convenience rule hinges on the employee’s workday location being for the employer’s necessity rather than for the employee’s convenience. As a practical matter, the two are not necessarily mutually exclusive particularly during the COVID crisis. To that end, can it really be said that days worked out of state under these circumstances—particularly in the case of a remote worker whose employer mandated they vacate their usual work location due to COVID—are for the employee’s own convenience?  Some employers have issued work-from-home directives to their workforce to comply with state-mandated occupancy limitations or to otherwise safeguard their workforce during an unprecedented global health crisis. That is a far cry from an employee simply electing to work remotely when the option is available.

If this troubling double taxation can be successfully challenged—and we expect that it will be challenged—it should be attacked along these lines.  With the exception of Massachusetts, which only just established its convenience rule at the onset of the COVID crisis,[10] the other five convenience rules, which have been on the books for a number of years, reference the convenience-versus-necessity distinction implicitly if not explicitly:


Convenience Rule


Conn. Gen. Stat. § 12-711(b)(2)(C)

“For purposes of determining the compensation derived from or connected with sources within this state, a nonresident . . . shall include income from days worked outside this state for such person’s convenience if such person’s state of domicile uses a similar test.”


2019 Schedule W

For nonresidents, non-Delaware workdays “must be based on necessity of work outside . . . Delaware in performance of duties for the employer, as opposed to solely for the convenience of the employee. Working from [a home office] does not satisfy the requirements of ‘necessity’ of duties for your employer and is considered for the convenience of the employee unless working from home is a requirement of employment with your employer.”


316 Neb. Admin. Code 22-003.01C(1)

“If the nonresident’s service is performed without Nebraska for his or her convenience, but the service is directly related to a business, trade, or profession carried on within Nebraska and except for the nonresident’s convenience, the service could have been performed within Nebraska, the compensation for such services shall be Nebraska source income.”

New York

20 N.Y.C.R.R. § 132.18(a)

“…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.”


61 Pa. Code § 109.8

Non-Pennsylvania workdays include days worked out-of-State performing services “which, of necessity, obligate the [employee] to perform out-of-state duties in the service of his employer.”

Accordingly, challenges of the double taxation resulting from the convenience rule may find success in arguing that the remote worker was in fact working in another state out of necessity and not for their own convenience. Depending on the situation, the unusual and unprecedented circumstances surrounding the COVID pandemic may lend particular credence to this argument.

The COVID pandemic has brought tax practitioners into unchartered waters in many respects.  While applying the Convenience Rule may have seemed fairly straightforward in the past, the very nature of the pandemic raises questions about the rule which remain unanswered. Ultimately, the outcome may depend on litigation or legislation, but in the meantime the possibility of double taxation is very real. 

Ariele R. Doolittle, Esq., is a senior associate in the State and Local Tax Practice Group of Hodgson Russ LLP.  She focuses her practice on state and local tax matters, including civil and criminal tax controversies, with an emphasis on New York State tax litigation. Ariele has successfully represented clients before state agencies and in state and federal court actions and appeals. She also advises clients on tax planning, residency planning and other administrative law matters. Prior to joining Hodgson Russ, Ariele was a law clerk at the New York State Division of Tax Appeals and Tax Appeals Tribunal.

[1] Mary Baker, Gartner, Gartner Survey Reveals 82% of Company Leaders Plan to Allow Employees to Work Remotely Some of the Time (July 2020).

[2] See Mark Klein and Emma Savino, TaxStringer, “The Multistate Tax Implications of a Mobile Workforce” (Mar. 2020).

[3] Connecticut - Conn. Gen. Stat. § 12-711(b)(2)(C); Delaware -30 Del. C. § 1124(b) and 2019 Schedule W; Massachusetts - 830 CMR 62.5A.3 (promulgated Oct. 16, 2020); Nebraska - 316 Neb. Admin. Code § 22-003.01C(1); New York - 20 N.Y.C.R.R. § 132.18(a) and TSB-M-06(5)I; Pennsylvania - 61 Pa. Code § 109.8.  A seventh state, Arkansas, recently issued a non-binding Legal Counsel Opinion that effectively applied the rule, which appears to be at odds with the state’s regulation at Ark. Income Tax Reg. § 1.26-51-202(c).

[4] Comptroller v. Wynne, 135 S. Ct. 1787, 1801 (2015).

[5] 20 N.Y.C.R.R. § 132.18(a).

[6] See N.C. Gen. Stat. §§ 105-153.2(2), 105-153.4(b).

[7] See 20 N.Y.C.R.R. § 105.20.

[8] See N.C. Gen. Stat. § 105-153.9(a)(1).

[9] See Conn. Gen. Stat. § 12-711(b)(2)(C).

[10] See Massachusetts Department of Revenue, Technical Information Release, TIR 20-5: Massachusetts Tax Implications of an Employee Working Remotely due to the COVID-19 Pandemic (4/1/2020).

Views expressed in articles published in Tax Stringer are the authors' only and are not to be attributed to the publication, its editors, the NYSSCPA or FAE, or their directors, officers, or employees, unless expressly so stated. Articles contain information believed by the authors to be accurate, but the publisher, editors and authors are not engaged in redering legal, accounting or other professional services. If specific professional advice or assistance is required, the services of a competent professional should be sought.