July 16, 2010
Question of the Week: Where Do I Pay Unemployment Tax for Employees Who Work in More than One State?
Filed under: News
Vision Payroll

This week’s question comes from Julia, a business-owner. We have employees who work in more than one state. I understand how to determine which state’s income tax to withhold, but I don’t know what to do about unemployment tax. Where do I pay unemployment tax for employees who work in more than one state? Answer: The general rule for employees who work in more than one state is that employees should be covered by only one state to prevent employers from paying tax in two or more states for the same employee. To determine which state, employers should look at four factors, in the following order:

  1. Localization of Services
  2. Base of Operations
  3. Place of Direction or Control
  4. Place of Residence

The employee is covered by the state under which that employee first qualifies using these factors. For example, if an employee is determined to be covered by a state under the Localization of Services test, the results of the remaining tests are irrelevant. Only if a determination cannot be made under the Localization of Services test does the employer consider the Base of Operations test.

Contact Vision Payroll if you have further questions.


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