1. Telecommuting employees and corporate income tax:
SUBMITTED BY TOM VILORD, PRESIDENT – VILORD WEALTH ADVISORS,
TURNERSVILLE, NJ
INFO@VILORDWEALTH.COM, 877-VILORD1
Handing bad news to out-of-state companies with telecommuting employees, an appeals court has
ruled that even one such worker in New Jersey triggers the corporate income tax.
The New Jersey Superior Court, Appellate Division's March 2 ruling, in Telebright Corporation v. Director,
Division of Taxation, A-5096-09, is of first impression in New Jersey and beyond.
The panel, and the Tax Court judge below, rejected arguments by Telebright, a software company
incorporated in Delaware and located in Rockville, Md., that it did not do business in New Jersey and
requiring it to pay corporate taxes here would violate the U.S. Constitution's due process and commerce
clauses.
SrisathyaThirumalai lived in Silver Springs, Md., when she began working as a software developer for
Telebright in 2001, but in 2004, her husband got a job in New Jersey and the couple relocated to Pine
Brook.
She kept her job writing software code for use in the company's "ManageRight" web application by
working full time from her new home. She used a company-provided laptop at first but later replaced it
with one she paid for herself.
Thirumalai's typical workday involved communicating with her project manager, an independent
contractor in Boston who would give her assignments by email or phone. The finished product was
uploaded onto a Telebright server. She had to fill out time sheets using her computer and a web-based
program.
Thirumalai did no solicitation or sales work and she was not reimbursed for expenses, including those
incurred in twice-a-year trips to Rockville for company-wide meetings.
The company kept an office for her in Maryland but withheld New Jersey income taxes from her
paycheck and sent the money to New Jersey tax authorities.
In 2006, the Division of Taxation asked Telebright about its contacts with New Jersey. The company
responded that it had an employee living in New Jersey and working from home and that it withheld
state taxes on her behalf.
Telebright was notified that it had to file New Jersey corporation business tax returns for 2004 going
forward. The original rationale was that it had an office in the state but was later changed to that it was
doing business here.

2. In a published opinion on March 24, 2010, Presiding Tax Court Judge Patrick DeAlmeida held that
Telebright had been doing business in New Jersey since 2004.
He found that three of the five "doing business" factors under state regulations –
the existence of employees in New Jersey,
the nature and extent of the New Jersey activities,
the continuity and regularity of those activities -- supported his conclusion.
He also pointed out that it comported with the common understanding of where a company does
business as the location employees report for work, receive, and carry out assignments and deliver their
final work product, all of which Thirumalai did in New Jersey.
Her use of a company laptop for part of the time bolstered that conclusion.
For commerce clause purposes, Thirumalai was producing part of a company product here, Telebright
was benefiting from the protections afforded Thirumalai by New Jersey law, and the additional effort of
calculating and paying the business tax would not unduly burden its conduct of interstate commerce.
Telebright's lawyer, Richard Bove of Philadelphia, says the decision is a terrible one for businesses in
other states with employees in New Jersey working from home and shows that New Jersey is not
friendly to business.
There will no appeal, however. The company would only have to pay the minimum taxable amount of
$750 but fought the tax on principle, he says.
SUBMITTED BY TOM VILORD, PRESIDENT – VILORD WEALTH ADVISORS,
TURNERSVILLE, NJ
INFO@VILORDWEALTH.COM, 877-VILORD1
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