State-level income taxes withheld from employee wages and remitted to state revenue agencies. 41 states plus Washington DC impose individual income tax. Nine states -- Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming -- do not.
Why State Income Tax Withholding matters for employers
State income tax withholding obligations are triggered by the state where the employee performs services, not where the employer is headquartered. An employer based in Texas with no state income tax may still have withholding obligations if it has employees working in California, New York, or other income-tax states. Multi-state withholding requires separate state tax account registration and filing in each applicable state.
Reciprocity agreements between neighboring states can simplify multi-state withholding for commuters by allowing employers to withhold only for the employee's home state. Not all state pairs have reciprocity agreements, and agreements can be cancelled, so employers must stay current on applicable agreements.
How BEG handles State Income Tax Withholding for clients
BEG Managed Payroll handles State Income Tax Withholding as part of a fully managed payroll service at $25-$45 per employee per month. Clients do not need to track compliance rules, filing deadlines, or calculation methods related to State Income Tax Withholding on their own. Everything is included. Learn about BEG Managed Payroll.
Frequently asked questions
Do employers have to manage State Income Tax Withholding themselves?
No. A managed payroll provider handles State Income Tax Withholding as part of full-service payroll. BEG manages this for clients at $25-$45 PEPM with no system migration required.
What happens if State Income Tax Withholding is handled incorrectly?
Errors related to State Income Tax Withholding can trigger IRS penalties, state agency assessments, or employee disputes. Catching and correcting errors before filing is far less costly than after-the-fact corrections.
How does BEG handle State Income Tax Withholding for managed payroll clients?
BEG tracks, calculates, and remits everything related to State Income Tax Withholding as part of fully managed payroll. Clients do not need to monitor compliance -- that is included in the service at $25-$45 PEPM.
Want payroll fully managed?
BEG handles everything at $25-$45 PEPM. See your exact price in 90 seconds.
About the author
Anthony Moretti is VP of Sales at Business Executive Group, where he builds BEG's managed payroll and HR service verticals for employers across Dallas-Fort Worth and nationwide. He writes the BEG Payroll Glossary to give employers plain-English answers on payroll and compliance.
Connect with Anthony on LinkedIn →