State Unemployment Taxes

The State Unemployment Tax Act (SUTA) is a counterpart of the Federal Unemployment Tax (FUTA). SUTA is used to fund income for unemployed or displaced workers. It is a payroll tax paid by employers on behalf of their employees. Employers pay the SUTA and FUTA on a quarterly basis for eligible wages. Eligible wages include commissions and bonus in addition to their basic pay.

All states require employers to pay SUTA. Taxable wage limits vary by state. The SUTA rate also fluctuates by state and industry. Some industries have a higher rate of SUTA taxes because they have higher turnover amongst their workforce.

When a new company creates a profile with their state for SUTA purposes, the state will assign the unemployment tax rate based on the unique circumstances of the company and industry. Furthermore, a new company usually pays a higher tax rate since there is no historical data on its employee turnover rate. These factors are referred to as the Experience Rating of the company. For example, construction companies normally pay a higher SUTA rate because of their higher turnover ratio and lower experience rating. Every year, the state re-assesses a company’s experience rating based on the cost of unemployment benefits for its former employees.