For example, the New Jersey Tax Court in Telebright Corporation, Inc. v. Director, Division of Taxation (New Jersey Tax Court, No. 011066-2008, March 24, 2010), recently held the telecommuting employee was enough to create nexus for the corporation in New Jersey. However, in the case, the taxpayer's telecommuting employee worked in New Jersey every day and never went to the corporate headquarters in Maryland. In addition, the corporation owned the laptop that the employee used in New Jersey.
The Tax Court stated that the consistent contact (telecommuting employee working in New Jersey every day) with New Jersey was not sporadic, occasional, or intermittent. While it is true that the taxpayer never maintained an office in New Jersey, nor solicited business in New Jersey, its daily contact with the State through its employee is sufficient to trigger application of the Corporation Business Tax Act.
Whether a foreign corporation is doing business in New Jersey is determined by the facts in each case. Consideration is given to such factors as:
1. The nature and extent of the activities of the corporation in New Jersey;
2. The location of its offices and other places of business;
3. The continuity, frequency and regularity of the activities of the corporation in New Jersey;
4. The employment in New Jersey of agents, officers and employees;
5. The location of the actual seat of management or control of the corporation.
“There is no one, single controlling factor nor is there a bright line standard that determines whether a foreign corporation's in-state activities meet the Director's regulatory requirements for doing business. Rather, it is only by close scrutiny of all the facts of the case, taken as a whole, that a final determination can be made.”
"It is commonly understood that a corporation is “doing business” at the place where its employees are expected to report for work, where they are regularly receiving and carrying out their assignments, where those employees are supervised, where they begin and end their work day, and where they deliver to their employer and customers a finished work product."
In this case, all of these functions were performed by the telecommuting employee in New Jersey.
Applicability to Your Company?
According to the case above, your company's telecommuting employees in New Jersey could create income tax nexus for your company. However, a position could be taken that telecommuting employees do not create nexus for your company if your company's facts are closer to the following:
- Telecommuting employees do not work in NJ every day; therefore, the contact with NJ is sporadic, occasional and intermittent.
- Your company does not own property in NJ,
- Your company does not solicit sales within NJ, and
- Your company's activities in NJ taken as a whole are de minimis.
Also, if you have questions regarding telecommuting employees creating nexus in other states, please contact me.