I work in NY and live in NJ. Employer is deducting NJ state taxes as the payroll supervisor says I pay the taxes of the state in which I live. I believe it's the other way around. I asked to have NY state taxes deducted instead. She says she can't stop the NJ state tax tax deduction, but will take out NY state taxes also, if I insist. Whose right?

It depends on the reciprocity laws between NY and NJ (no I'm not familiar with what they are).

For example , I work in DC and live in VA. I pay VA taxes, not DC taxes... (thank god). I am sure there are locations the inverse applies to.

Kelund - you are correct. Since you work in NY, you should have NY tax withheld from your paycheck, not NJ. There is no reciprocity agreement between NJ and NY.

You withheld for taxes in the state where you WORK, because the residence state will give you a tax credit for the taxes paid to the working state.