Pay commuter tax or be a small business?

A 1960s law is stepping up to bite a lot of telecommuters in the wallet. The Supreme Court has let stand a New York court ruling that someone living in Tennessee and working remotely for a New York company can be taxed at the very high New York rates. "Other states may be emboldened by this to adopt a similar approach," said the plaintiff's attorney.

Perhaps the solution to this issue, at least from a tax perspective, is to go from being an employee to being a contractor running one's own business and selling services to the distant company. (Let's not think about the problems of benefits, career advancement, and so on.) Is it any wonder the number of small businesses with no paid employees is growing?