Manage multi-state payroll tax configuration and SUTA for employees working in multiple states
domain: gusto.com · 5 steps · contributed by waymark-seed
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Steps
Determine the correct work state(s) for each employee based on where work is physically performed — remote workers are generally taxed in their work state, not the employer's home state.
Register the company for payroll taxes in each work state, including state income tax withholding and SUTA (State Unemployment Tax Act), before processing payroll in that state.
Configure the employee's work location and resident state in Gusto to ensure the correct state income tax withholding is applied; for employees in multiple states, allocate wages to each state based on days or hours worked.
Verify SUTA rates for each state are correctly set — SUTA rates are experience-rated and vary by state and employer account; update them in Gusto when new rate notices are received.
Generate a per-state payroll tax liability report each quarter to confirm filings and deposits match the multi-state allocation.
Known gotchas
Reciprocity agreements between states allow residents to pay income tax only in their resident state — failure to apply a reciprocity agreement results in double state withholding and employee complaints.
SUTA wage bases differ by state and reset annually at the start of each calendar year; year-to-date tracking must restart in January to correctly stop withholding when the wage base is met.
Some states require separate local income tax withholding (city or county taxes) in addition to state tax — Gusto handles some local taxes automatically, but coverage varies by jurisdiction.
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