A Tennessee employee worked for a Tennessee company in Tennessee and all was right with the world. But then the company dissolved, and the individual was hired by a client of his former company—the client is a New York company. Although he traveled to New York on business (and dutifully reported the 25 percent of his time he spent in New York), the rest of his time he earned his living from Tennessee, working by computer and telephone. The individual paid the New York taxing authority (and never disputed) the pro rata portion of his income for the time he spent in New York, but the remainder of his work was done in Tennessee and not (so he thought) subject to New York tax.
A few months ago, a divided Court of Appeals in New York ruled that the 25 percent connection to New York supported the argument that this “minimal connection” allows New York to tax everything the taxpayer earns because it is earned from a New York company! “Foul,” cries the dissent—what about the secretary working in the Boston office of a New York-based law firm? A sales manager for a New York company working in California? This was a very close decision (4–3) but the court ruled that tax was payable to New York on 100 percent of the income earned from the New York company.