Tax Court of New Jersey rules that single employee telecommuting from New Jersey is sufficient contacts to permit New Jersey to tax out of state business

Jan 31, 2012   

In Telebright Corp. v. Director, Division of Taxation, the State of New Jersey used a single employee’s act of telecommuting while in New Jersey as the jurisdictional basis to tax the income of a corporation that had no offices in the State of New Jersey. The employee received and completed her work assignments from her home in New Jersey using a company-provided computer. Based on these indirect contacts, the business was held to be "doing business" in New Jersey. Thus, the businesss income was subject to taxation in New Jersey under New Jersey law.

In its decision, the full text of which is available here, the Tax Court of New Jersey ruled that such taxation was consistent with both the Due Process Clause and Commerce Clause. The Court held that New Jerseys attempt to tax did not violate the Due Process Clause because the corporation had sufficient minimum contacts with New Jersey to justify taxation. The court also held that the employee’s presence in New Jersey in an employee capacity satisfied the substantial nexus requirement of the Commerce Clause because the corporation enjoyed the benefits of New Jersey’s labor markets.

The significance of this decision is that when an employee is located outside of the jurisdiction where the business is incorporated and/or doing business, the foreign jurisdiction may have a claim to tax the business.  Consequently, businesses must be cognizant of the fact that they may have filing obligations and tax liabilities to jurisdictions that they had not previously considered.

The attorneys at Fuerst Ittleman have extensive experience advising clients to minimize or reduce the ability of state and local governments to tax businesses.  Additionally, the attorneys at Fuerst Ittleman have extensive experience litigating against the government when it assesses additional tax, penalties, and interest.  You can reach an attorney by emailing us at