The way that the NY state tax calculation works is that NY
looks at all of your income from all sources and generates a tax on all
this income. When NY is determining the actual NY state taxes owed, NY
multiples the total NY taxes on all income by the percentage of NY source
income over all source income.
So if your income from all sources is $10,000 but
your NY source income is $8,000, NY will calculate the NY state tax on $10,000
then multiply the total state taxes generated by 80% ($8,000/$10,000). So even
though you all your income is being reported on your NY state tax return,
you are only being taxed on the NY source portion of your total income.