Magazine article The CPA Journal

Telecommuting and Taxes: The Telebright Case

Magazine article The CPA Journal

Telecommuting and Taxes: The Telebright Case

Article excerpt

Computer and telecommunications technologies have made it easy for employers and staff to stay in touch remotely, and the economic downturn over the past few years has spurred businesses to cut fixed costs such as rent. Taken together, this means that telecommuting, when properly monitored, offers benefits for the employer and the employee. As a recent tax case shows, however, a side effect of telecommuting can be nexus and the related tax consequences.

The facts of Telebright Corporation, Inc. v. Director, Division of Taxation (New Jersey Tax Court, No. 011066-2008, March 24, 2010) likely have implications for many other businesses entities. Telebright, which offers software solutions for expense management and energy savings, was incorporated in Delaware, with its principal offices in Rockville, Maryland. In 2001, Telebright hired a programmer in its Maryland location. In 2004, the employee relocated to New Jersey and continued to work for Telebright from her home there. At first, Telebright provided the employee with a laptop, but at some point, the employee bought and used her own computer. She was not compensated for home office expenses. She never solicited customers and never sold any product or services in New Jersey for Telebright.

New Jersey sent the company a nexus questionnaire and ultimately determined that Telebright had nexus with the state. The company disagreed and petitioned the New Jersey Tax Court. The court agreed with the Division of Taxation that Telebright had sufficient nexus to require the filing of a return. The federal Interstate Income Tax Law (P.L. 86-272) prevents a state from charging income tax on income generated within the state from interstate commerce if the only business activity within the state is the solicitation of orders for tangible personal property. …

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