# Is New York's formula for taxing non-residents constitutional? How? [closed]

When a New York State non-resident has NYS income, NY's tax rates are based NOT on the absolute amount of the NYS income, but on the non-resident's federal income, pro-rated to the percentage earned in NY.

For example, if the non-resident earns \$5000 in NY, and \$95,000 elsewhere, her tax is not based on a \$5000 income, but rather, on 5% of a \$100,000 income. In this example 5% is the percent earned in NY. The computation is on NY's form IT203, lines 31 to 46.

My question: How can a state compel a non-resident to even report income that was earned elsewhere, and then to levy taxes that are partly based on it?

• Apr 28, 2021 at 0:36
• Can you explain the issue? 5% of 100k is 5k. Apr 28, 2021 at 1:09
• @HartCO I think they meant to say 5% of the tax on \$100,000 income, rather than the tax on \$5000 income. Apr 28, 2021 at 1:21
• Which part of the constitution do you think this practice is breaking? Apr 28, 2021 at 1:42
• @jay613 This would be an appropriate venue for a question like "how do I calculate how much tax I owe to New York?", but your question is more focused on the legal aspect than the financial. Apr 28, 2021 at 2:11

Actually, it sounds like NY is one of the states that plays nice.

Imagine that you had a warehouse in a state and no income was earned in that state. Also, imagine that all your sales were in an adjacent state. Imagine the state you sold in had no income tax. Is none of your income taxable in the state with storage?

If the storage didn't exist, then sales would be reduced down to what could be held in the store. The out of state storage materially impacts the income earned in the other state. That additional income, it could be argued, should be imputed to the state where the storage happens assuming there are no additional costs.

It isn't uncommon for firms and people to split the location of capital, expense and revenue among various states. You could have servers in one state, programmers in another state working from home selling to a customer in a third state.

Each state makes its own laws as to how to allocate the role of capital, expenses and revenue. They often conflict. You end up having to follow all the laws, which can result in higher taxes overall.

Once you enter a state, you become subject to its laws. Because we live in a virtual world, the states require a "nexus," into the state. You do not have to step foot in it.

Each state is sovereign, subject to the federal powers granted to the national government in the Constitution. They are free to do anything they want as long as it doesn't specifically conflict with a federal power, or a right granted by the Constitution. They were intended to be a federated set of sovereign nations, the meaning of "state" at the time. They can do most anything they like inside their borders, particularly with regards to taxation.

I used to live in a place that had a tax on breathing. If you were breathing, it was \$7.50 per year. You didn't have to pay it if you stopped breathing during the year. They were not going to dig you up to get you to pay.

I also lived in a state where towns could charge a tax on a business's worldwide income. It actually could be a material amount for a multinational corporation. Step foot in one of those towns for one second during the year and you could owe enormous sums.

• playing nice has nothing to do with constitutional, the answer would be based on citing a court challenge or lack thereof. in this case, the differences in treatment could fail a 5th amendment or 14th amendment if the state fails to prove its case well.
– CQM
Apr 28, 2021 at 10:46
• I'm swayed now that this question is off topic for this venue, but I also think this is a pretty good answer. It makes me wonder just how aggressive a state could be. If I drive from Detroit to Miami and pay tolls in every state along the way, could every one of them declare that I owe tax on all my worldwide income? Could states and cities, without any true malevolence or conspiracy but simply greed, all tax me at a combined rate that far exceeds my actual income? I need to figure out how to pose these questions constructively, probably in Law SE. Apr 28, 2021 at 11:46