State withholding taxes

What is withholding tax?

There are two types of withholding tax in State:

  • Income (employee) Withholding
  • Mineral Production (Royalty) Withholding

    • All employers must withhold from wages paid to employees performing services in State and State residents working outside State. Mineral producers must withhold tax from payments resulting from the production of minerals in State.

    Who must withhold employee wages?

    Any employer making payment (including payments in a medium other than cash) for services performed by an employee must withhold and remit tax according to the laws and rules of the Internal Revenue Code and State Tax Code. In order to withhold State tax from employees, the employer must obtain a withholding tax license from the State State Tax Commission.

    Any employer who does business in State for 60 days or less during a calendar year may be exempt from withholding tax requirements. The employer must receive advanced approval from the Tax Commission to certify the employer is exempt. Thereafter, if the employer does business exceeding 60 days, the employer is liable for all taxes due during the period of exemption. An additional 30 day exemption may be granted if good cause is shown.

    What are wages?

    State defines wages by the Internal Revenue Code, Section 3401(a) as, "all remuneration for services performed by an employee for his employer, including the cash value of all remuneration (including benefits) paid in any medium other than cash."

    Federal code specifically exempts the following wages from withholding, but wages may be withheld if the employer and employee agree:

  • Newspaper carriers under age 18 delivering to customers.
  • Newspaper and magazine vendors buying at fixed prices and retaining excess from sales to customers.
  • Household workers.
  • Agriculture workers who are not subject to FICA withholding.
  • Ordained ministers for compensation earned in the performance of their services as a minister.
  • Amounts paid for casual employment (less than $50 paid and less than 24 days worked in that quarter or in the preceding quarter).
  • Must be for work not in the employer\\'s line of business.
  • Does not apply to corporations.
  • Cash or non-cash tips of less than $20 per month.
  • Moving expenses.
  • Certain employer contributions to IRAs and deferred compensation plans.
  • Individuals not working in the course of the employer\\'s business (subject to the casual labor rules above).
  • Employees of foreign governments and international organizations.
  • Armed forces personnel serving in a combat zone.
  • Foreign earned income, if an exclusion from gross income.
  • Members of a religious order performing services for the order or associated institution.

    • Other benefits provided by the employer if it is reasonable to believe that the employee can deduct those amounts from taxable income under a separate section of the code.

  • If you are required to report employment taxes or give tax statements to employees or annuitants, you need a federal EIN.
  • Application is made to IRS on Form SS-4, Application for Employer Identification Number

    • Employers must reconcile their withholding taxes each year and provide copies of all W-2, 1099 or TC-675R forms issued with State taxes withheld must also be submitted to the State State Tax Commission. The annual reconciliation report is due on February 28 when filed on paper, or March 31 if filed electronically. If a due date falls on a weekend or holiday, the return is due on the next business day

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