Pennsylvania Convenience of Employer

Question

I moved to NC and will live here all year. Due to Covid-19, employer is allowing remote work, I chose that option..

My employer is in PA. HR is taking out NC taxes. Should they be taking out PA taxes.

From this link, it seems my income should be sourced from PA. Am I understanding it correctly?

The Convenience of the Employer Doctrine

Pennsylvania, like many other states, follows the “convenience-of-the-employer” doctrine. It provides that compensation for services performed by nonresidents cannot be allocated to the services’ actual places of performance if they were performed there only for the employee’s convenience or if they were not performed there “of necessity in the service of the employer”. In these instances, the compensation must be allocated only to the state (or among the states) where the employee is of necessity performing actual services in the service, and for the convenience, of the employer.

The only factors considered under this doctrine are:

Whether the services performed by an individual outside the taxing jurisdiction were performed in the service, and for the benefit, of the individual’s employer; and
Whether such services were such that they could have been performed at an office of the employer within the taxing jurisdiction (or could have been performed at an office of the employer within the taxing jurisdiction had the employer made suitable accommodations available to the employee).

Consequently, under the “convenience-of-the-employer” doctrine, allocation depends upon whether the services in question are of a character required to be performed away from an office of the employer and outside the taxing jurisdiction or require highly specialized facilities not available at or near an office of the employer

https://www.revenue.pa.gov/FormsandPublications/PAPersonalIncomeTaxGuide/Pages/Gross-Compensation.aspx

https://www.revenue.pa.gov/COVID19/Pages/Telework.aspx

ErnieS0 · Answer

It depends. Pennsylvania says employee compensation remains Pennsylvania sourced for employees temporarily working from home due to the COVID-19 pandemic.

See Telework During the COVID-19 Pandemic

In your case you moved to North Carolina. This sounds like a permanent move and a permanent change of situation. Discuss this with your HR Department as these cases are facts and circumstance-based.

Pennsylvania does follow the convenience of the employer doctrine. The doctrine kicks in when compensation for services performed by nonresidents cannot be allocated to the services’ actual places of performance. Is there a specific tie-in to your place of Pennsylvania employment? For example, if you are in charge of multistate billing, your work may not have as strong a tie-in to PA as if you were making authentic Pennsylvania Dutch food.

The factors considered under this doctrine are:

Whether the services performed by an individual outside the taxing jurisdiction were performed in the service, and for the benefit, of the individual’s employer; and
Whether such services were such that they could have been performed at an office of the employer within the taxing jurisdiction (or could have been performed at an office of the employer within the taxing jurisdiction had the employer made suitable accommodations available to the employee).

It can be argued that you are performing services for the employer’s convenience, as your experience and specialized knowledge are valuable and it is more convenient to keep you employed than to hire someone else, especially if your physical presence is not required in the home office.

Your HR Department seems to think you are a North Carolina employee. Ask them how they came to that determination.