Employee Tax Registration Overview

Overview of state tax registrations and the various responsibilities that exist between an employer, tax jurisdiction, and Namely.

Welcome to the Namely Payroll State Tax Registration guide! Here we'll walk you through the process of registering for Tax IDs to help ensure sure your company is in compliance with each state, beginning with a general overview of the role Employment Tax Registration plays in setting your taxes up correctly in Namely:

Refer to this video: Tax Registration Overview


OVERVIEW

In the United States, each state mandates that any employer that employs workers within that state must formally register within the state for payroll purposes. 

In general, employers must obtain two identification numbers when registering: 

  • A withholding Identification Number (WH-ID) for tax withholding, and

  • An unemployment Insurance Identification number (UI-ID) for unemployment insurance

  • In addition, the employer must obtain the UI contribution rate (%)

To obtain this information, a company must register with: 

  • The state's Division of Revenue, which typically oversees the registration for tax withholding

  • The state's Department of Labor, which typically oversees the registration for unemployment insurance, and

Some states call these departments something different, but they function the same. 

Unemployment Insurance Registration

Each State’s Department of Labor (or equivalent) oversees the registration and administration of its unemployment insurance program. Unemployment insurance was designed with two major goals in mind: 
 

  1. To provide a weekly check to workers who lose their jobs through no fault of their own.

  2. To reward employers who minimize workforce turnover by assessing them a lower tax rate.  

To promote the two goals above, unemployment benefits are financed through federal and state unemployment taxes paid by employers like you, and employers must pay unemployment insurance taxes to the work-in state for each employee that works within that state. Every state has a system that bases your unemployment tax rate on the amount of benefits that has been paid to your former workers.

When a company hires an employee that works within a new state, the company must register for the state’s unemployment insurance program and in doing so, obtains an Unemployment Insurance Identification number (UI-ID). Additionally, the state will assign your company a UI contribution rate (%) that is specific to your company. This rate will determine how much UI tax should be paid during each payroll for the applicable employees.

Note that when an employer does not obtain a UI-ID for a state in which an employee works, Namely Payroll will not be able to remit the taxes collected to the State’s Department of Labor. This is because the State’s Department of Labor will not accept payments from Namely Payroll until a valid UI-ID accompanies the payment. Absent a UI-ID, it is possible that UI taxes will be remitted late to the state, and the state will assess penalties and interest. In this case, the employer will be responsible for paying these fees.
 

Tax Withholding Registration

On behalf of each W-2 employee, employers are required to withhold, on a per-paycheck basis, federal and state income taxes. Each state requires that income taxes are withheld from an employee’s paycheck with the exception of a few states that do not have state income tax which include: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. 

In order to withhold and remit income taxes on behalf of employees, employers must register with the State’s Division of Revenue (or equivalent). When a company hires an employee that works within a new state, the company must register for tax withholding and in doing so, obtains a tax Withholding Identification Number (WH-ID). 

Note that when an employer does not obtain a WH-ID for a state in which an employee works, Namely Payroll will not be able to remit the income taxes collected to the state’s Division of Revenue. This is because the State’s Division of Revenue will not accept payments from NamelyPayroll until a valid WH-ID accompanies the payment. Absent a WH-ID, it is possible that withholding taxes will be remitted late to the state, and the state will assess penalties and interest. In these events, the employers will be responsible to pay these fees.

 

YOUR RESPONSIBILITIES

Registering for unemployment insurance and tax withholding is a very important task that must be completed by your company’s payroll administrator. It is the employer’s sole responsibility to register for State Unemployment Insurance and State Tax Withholding in each state their employees work. 

Because registrations typically require in-depth information about the business, Namely does not register for taxes on behalf of clients unless we have been contracted to do so. For more information, review your contract with Namely or submit a Tax Registration case. 

 

TIME FRAME

With regards to registration for state IDs, timing is everything. Once an employer knows that they will hire an employee that will work in a new state, the employer should immediately register for unemployment insurance and tax withholding state IDs. Ideally, an employer should have obtained both state ID numbers prior to the employee’s first paycheck. 

If a state ID is received prior to an employee’s first paycheck, the company will surely be in compliance with the applicable state.  If a state ID is received after an employee’s first paycheck it is possible that the company will not be in compliance and that penalties and interest may be assessed on unemployment insurance and tax withholding that is submitted late.

The turn-around time for issuing new state IDs varies by state and can range from immediate to up to four weeks long. Due to the varying nature of timing between states, it is important that companies apply as soon as possible. For more detailed information on application time frames for each state see Time Frames to receive Tax IDs by State.
 

STATE-SPECIFIC REQUIREMENTS

When registering for state IDs, the overall process is very similar but each state has unique requirements and guidelines. Our state tax guides will help you and your team register for taxes in each jurisdiction.

Click on the state to learn how to register for required taxes and access Power of Attorney forms, tax withholding information, and more.


Alabama


Alaska


Arizona


Arkansas


California


Colorado


Connecticut


Delaware


District of Columbia


Florida


Georgia


Hawaii


Idaho


Illinois


Indiana


Iowa


Kansas


Kentucky


Louisiana


Maine


Maryland


Massachusetts


Michigan


Minnesota


Mississippi


Missouri


Montana


Nebraska


Nevada


New Hampshire


New Jersey


New Mexico


New York


North Carolina


North Dakota


Ohio

Oklahoma


Oregon


Pennsylvania

Rhode Island


South Carolina


South Dakota


Tennessee 


Texas


Utah


Vermont


Virginia


Washington


West Virginia


Wisconsin


Wyoming

Puerto Rico

 

NEXT STEPS

It is important that the payroll administrator keep track of all pending state IDs that they have applied for and the IDs' respective registration statuses. Payroll administrators should review Namely Payroll to ensure that each state has either Tax IDs input or is currently within the application process. 

To locate missing tax IDs within Namely Payroll, administrators can navigate to Company  > Tax and review the Tax ID field. Any taxes that list Applied For still need to be filled in with the proper tax ID. 

Once you've applied for new tax IDs

If you're still waiting to receive tax IDs from new jurisdictions, Namely allows you to note that the ID has been “applied for” by:

 

  1. Navigating to Payroll > Company > Tax > Add Tax. 

  2. Selecting the Waiting for Tax ID option.

Note that Namely cannot collect taxes until you enter a valid tax ID. Additionally, if tax IDs are still in "Applied for" status at the quarter close, Namely cannot file taxes for those jurisdictions at that time.
 

Once you've received new tax IDs

As soon as you've received new tax IDs, enter the withholding tax ID or unemployment ID into Company > Tax. For detailed instructions, see Adding and Editing Company Tax Codes and Rates in Namely Payroll.

Once a new tax ID is entered, Namely automatically collects previously uncollected amounts from the current quarter and onward on your next standard pay cycle. For more information see Automatic Tax Collection for “Applied For” Tax IDs.

Note that Namely does not automatically backfile for any missed quarters after new tax IDs are provided without your specific request. To request that Namely backfile on your behalf, submit a case in the Help Community by selecting Payroll > Taxes > Tax Services > Function = Applied for Recollection. 

Also be aware that certain situations may require you to wire funds to Namely once tax IDs are entered, including: 

  • Uncollected amounts remain from previous quarters

  • No scheduled pay cycles are left in the current quarter when you enter a new tax ID

 

OTHER SITUATIONS

New Clients Leaving a PEO (“Professional Employer Organization”)

There may be substantially more registration work required for companies leaving a PEO. Since PEOs technically “co-employ” your company’s employees, the PEO likely filed the unemployment insurance and tax withholding remittances under the PEO’s state ID, instead of your company's. 

It is very common that companies leaving a PEO must register with each state where their employees currently work because the company has never obtained unemployment insurance or tax withholding IDs in each respective state. Companies leaving a PEO should determine which states they are registered with and which they are not prior to leaving the PEO, or as soon as possible.
 

Reimbursable and Exempt Accounts

DISCLAIMER: The information listed below is considered "general/public." If your company qualifies for either of these statuses, Namely strongly suggests you review each specific employer tax agency's regulations and protocol.


Reimbursable Accounts

  • Employers including government and/or nonprofit organizations, as deemed by the Internal Revenue Service, may qualify for "Reimbursable" status (reference: Section 501(c)(3) of the Internal Revenue Code.)

  • Employers must register for this status.

  • Employers are provided with a unique Employer Identification Number (EIN.)

  • Employers are required to file tax returns (no taxes accrue, but employee wages must be reported.)

  • Employers are assigned a tax rate of 0.00% but will owe any future benefits paid to former employees.

  • Employers may be subject to supplemental tax rates based on the specific Tax Agency.


Exempt Accounts

  • Employers including government and/or nonprofit organizations, as deemed by the Internal Revenue Service, may qualify for "Exempt" status (reference: Section 501(c)(3) of the Internal Revenue Code)

  • Employers must register for this status and retain tax agency determination documents for your company's records

  • EIN = N/A (no account is established)

  • Tax return filing = N/A (no wages or taxes accrue)

  • Rate = N/A (no tax owed)