August 2, 1984

("Company") is a general contractor which operates in Massachusetts and New Hampshire. Three of its employees work and live in New Hampshire. You inquire whether the Company is required to withhold Massachusetts income taxes from the wages of these employees.

Non-residents of Massachusetts are subject to Massachusetts income taxation on items of gross income from sources within Massachusetts, which are those items derived from or effectively connected with (1) any trade or business, including any employment carried on by the taxpayer in Massachusetts; (2) the participation in any lottery or wagering transaction within Massachusetts; or (3) the ownership of any interest in real or tangible personal property located in Massachusetts. (G.L. c. 62, § 5A(a)).

Every employer making payment to employees of wages subject to tax under General Laws Chapter 62 shall deduct and withhold a tax upon such wages. (G.L. c. 62B, § 2).

Compensation for services rendered by a non-resident wholly outside Massachusetts, even though payment may be made from an office or place of business in Massachusetts of the employer, is not subject to the individual income tax. Where an individual is paid a salary and his employer requires that he perform services both within and without Massachusetts, only that portion of his salary attributable to his work in Massachusetts will be taxed.

For purposes of Massachusetts income tax withholding, the Company should withhold taxes only upon that portion of each non-resident employee's weekly wages which is attributable to work performed in Massachusetts.

If the three employees who live in New Hampshire perform no work for the Company in Massachusetts, no Massachusetts income taxes should be withheld from their wages.

Very truly yours,

Commissioner of Revenue

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LR 84-57