New Jersey employers with remote employees in New York, Alabama, Delaware, or Nebraska should review New Jersey's newly enacted 'Convenience of the Employer Rule' to ensure they are properly withholding state income and payroll taxes for those remote employees. This is a result of a New Jersey withholding-tax requirement that was first imposed in 2023 in response to the proliferation of employees working remotely following Covid-19.

States have long grappled with the question of how to properly source the income of an employee who works at home in one state, for an employer in another state. Some jurisdictions—most infamously New York—have long addressed this question by adopting an aggressive Convenience of the Employer Rule.

This rule generally sources to an employer's state the income of certain employees that work out-of-state for their own convenience rather than for the necessity of their employer. Employers must generally withhold state personal income and payroll taxes for such employees. For example, if a resident of New Jersey works for an employer in New York, that employee's income is sourced to New York and subject to New York income taxes.