Unemployment tax rules for multi-state employees
This refers to employees who work in multiple states. State unemployment tax is generally remitted to the state where an employee works. If the employee works in more than one state, this can cause confusion on which state the employer should pay State Unemployment Insurance (SUI) tax.
The U.S. Department of Labor has created a set of rules to guide employers on which state to correctly remit SUI. The following factors should be used in consecutive order to determine the correct state:
- Localization of Services: Where the employee works majority of the time
- Base of Operations: Where the employee has a base of operations, and performs some services
- Place of Direction and Control: Where the employee receives direction and control from the employer, and performs some services
- Residence: Where the employee resides, and performs some services
- Reciprocal Agreements: If the states have reciprocity, employer can choose the state of coverage
Review the Localization of Work Provisions document on the U.S. Department of Labor's website for more information.