Committee hears how Vermont taxes remote workers and why New York's rule complicates sourcing

Department of Taxes officials told the Ways & Means Committee that Vermont determines residency by domicile and a 183‑day presence rule; residents are taxed on worldwide income while nonresidents are taxed only on Vermont‑source income.

Will Baker described apportionment mechanics and the Other State Tax Credit (OSTC) that offsets Vermont tax liability for income taxed in other states, but he warned of difficult interstate conflicts when states apply different sourcing rules. Baker singled out New York’s “convenience of the employer” rule, which can treat remote work as New York income in situations where an employee asks to work from home, and contrasted it with Vermont’s simpler physical‑presence rule: “If you’re in the state of Vermont working, that’s Vermont income, period.”

Committee members asked about middle‑ground cases — people who split time between residences, own a seasonal home, or work remotely for months — and Baker said compliance is stronger for organized assignments (temporary work assignments, traveling nurses, long‑term contractors) but weaker for intermittent or informal arrangements. He said the department evaluates return on investment before launching targeted audit programs for specific fact patterns.

Members also raised property ownership and homestead declaration issues: staff said homestead status is a separate data field from property ownership and that the department compares household income for property‑tax credits with personal income returns when necessary. The department noted some jurisdictions have higher nonhomestead rates, which can create incentives, and that ownership through LLCs can complicate homestead treatment and compliance checks.

No legislative action was taken; staff recommended further review and, when needed, targeted compliance programs rather than immediate broad enforcement changes.