Those employers who are working in a state which has income tax have to pay both; state and local payroll tax withholding. Employers who are working in a state with an income tax have payment and reporting state tax obligations.
Multistate employment withholding may be governed by reciprocal agreements between states. In addition, several states have mandated disability programs which impose payroll tax responsibilities on employers.
Employer has numerous federal payroll tax responsibilities for the employees. If your organization is working in a state that imposes a personal income tax, you can add the requirement of withholding state taxes from employees’ wages to your payroll tax responsibilities.
List of states that do not impose personal income tax
Although majority of states impose a personal income tax. There are some states which do not impose a personal income tax are:
- New Hampshire
- South Dakota
Every other state has a personal income tax which therefore requires employers to withhold the tax from employees’ wages.
What are the best ways to fulfill the state payroll tax responsibilities?
Most state and federal law are almost similar. The states allow employers to use methods that are similar to those used for federal tax purposes in determining their state income tax withholding amounts. In few of the states the local governmental units impose their own income tax. If your business is running in any of these localities you will have to fulfill an additional income tax withholding obligation.
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