Income/Franchise:
New Jersey Division of Taxation Addresses “Convenience of the Employer” Rule for Nonresidents Who Never Physically Work In-State

Convenience of the Employer Sourcing Rule FAQs, N.J. Div. of Tax. (10/27/23). The New Jersey Division of Taxation (Division) issued some answers to frequently asked questions (FAQs) pertaining to recently enacted New Jersey legislation that adopts a “convenience of the employer” rule for nonresident income sourcing for New Jersey gross (individual) income tax purposes [see A.B. 4694 (2023), and State Tax Matters, Issue 2023-30, for more details on these law changes], including addressing whether this rule applies to an Alabama, Delaware, Nebraska, or New York resident employee working for a New Jersey company who does not physically work in New Jersey in a calendar year at all. In response, the Division explains that, in general, “a minimum connection is required for taxation.” Accordingly, for residents of those states imposing a convenience of the employer rule, if an employee performs no services in New Jersey, even if employed by a New Jersey employer, wages are not allocated to New Jersey under the new convenience of the employer rule. Another FAQ fact pattern addresses whether an employer with multiple offices in several states, including New Jersey, that employs a resident of Alabama, Delaware, Nebraska, and New York, is considered a New Jersey employer for purposes of the convenience of the employer rule. Please contact us with any questions.