So, you may be feeling smug about your telecommuting arrangement. You may have set up a nice life, whereby you can work from home, and you can avoid the expense and hassle of commuting to work. But just when all seems fine, you now learn that you may have to pay state income tax on all of your income with respect to a state where you do not live and where you do not work. How can this be? Read on.

In a case called Matter of Huckaby, a New York state appellate court, in a 4-3 vote opinion, just ruled that a telecommuter who works for a New York company but who lives and performs most his work in Tennessee still must pay New York state taxes on 100% of his income. The court so ruled even though this particular employee spends no more than a quarter of his working time in New York for his employer.

Under New York's "convenience of the employer" test, if a given employee works outside New York for a New York employer, New York asserts its ability to tax all of the employee's earnings for the New York employer, regardless of how much time, if any, the employee spent working inside of New York.

In Matter of Huckaby, the appellate court ultimately cast aside constitutional challenges to this convenience of the employer test and ruled that this test does not cause commerce or due process violations of the United States Constitution.

Not surprisingly, this result has come under harsh criticism. There is the concern about potential double taxation of employees in their home states and where their employers are located. In addition, this type of result is seen as a threat to the very notion of telecommuting, which otherwise has many favorable attributes. Indeed, millions of people now work from home, according to U.S. Census Bureau statistics.

It is possible that Huckaby may appeal this case to the United States Supreme Court, and this may be a case worth the high court's attention.

Meanwhile, the only partially good news here is that most states, unlike New York, apportion income for taxation purposes. Thus, a person working for a company not based in New York and who works in a different state than where the company is based likely would pay income taxes in both states, but on an apportioned basis in terms of how much time the person spent working for the company in his or her home state and where the company is based.

Eric Sinrod is a partner in the San Francisco office of Duane Morris (www.duanemorris.com), where he focuses on litigation matters of various types, including information technology disputes. His column appears Wednesdays at USATODAY.com. His Web site is www.sinrodlaw.com, and he can be reached at . To receive a weekly e-mail link to Mr. Sinrod's columns, please send an e-mail with the word Subscribe in the Subject line to .

Reprinted here with permission from USAToday.com.