State and Local Taxes
State and local taxes represent categories of taxes that exist in some states and are generally at the state, county, city, or school district level. Calculation rules exist for most of these taxes.
However, there are some state and local employer taxes that you define manually.
For example:
-
Colorado Employer Occupational Privilege Taxes
-
Employer Payroll Expense Taxes for Newark, St. Louis, and San Francisco
-
Kentucky Rural Economic Development Act
-
New York Employer Compensation Expense Program
-
Oregon Transit Employer Taxes
Defining state and local taxes involves several steps.
-
Verify the Tax with your tax-filing provider.
-
Configure the deduction element.
-
Identify the jurisdiction.
-
Configure the balances.
-
Prepare for third-party reporting.
Verify the Tax with Your Provider
Contact your tax-filing account manager and confirm they support the tax you want to add and can process its payments.
You must also communicate to your provider the tax code you plan to give to the new tax. Tax codes can be any unique alphanumeric combination, with the following restrictions according to their level.
This tax level |
Has these tax code restrictions |
---|---|
Federal |
Any alphanumeric value, up to 15 characters. |
State |
Any alphanumeric value, up to 13 characters. The 2-character state postal code is automatically prefixed to this value. |
County |
Any alphanumeric value, up to 10 characters. The 2-character state postal code and 3-character county geocode are automatically prefixed to this value. |
City |
Any alphanumeric value, up to 6 characters. The 2-character state postal code, 3-character county geocode, and 4-character city geocode are automatically prefixed to this value. |
School District |
Any alphanumeric value, up to 8 characters. The 2-character state postal code and 5-character school geocode are automatically prefixed to this value. |
Configure the Deduction Element
Element configuration for state and local taxes involves activities in the following areas.
What you want to do |
How you do it |
---|---|
Define the element |
Use the Elements task to define an element for each state and local tax. These elements should use the Employer Taxes primary classification, although other classifications like Employer Liabilities are acceptable for legacy elements. Answer all other prompts in the Create Element template as appropriate for the tax you're defining. Be sure to include contexts as is appropriate for the tax (state, county, city, and school district). To ensure data passes correctly from the base element to the results element, you must set the priority of the results element so that it processes after the base element. |
Set the input values |
Depending on the tax you're defining, create State, County, City, and School District input values as needed. You must define State, County, and City with display sequences of 1, 2, and 3 respectively. Note: If the element has input values that already use
these sequences, you must change them.
Set an appropriate value for Reference. This sets the appropriate default validation source. |
Configure the fast formula |
When you complete the new element definition, the task automatically creates one or more default fast formulas. Use the Fast Formulas task to modify the calculator formula to correctly calculate the state or local tax. The changes you make are dependent upon the tax's specific tax rules. For further info, see your state or local tax authority. Modify the processing rules on the formula results. Set the contexts on the results element as needed. |
Identify the Jurisdiction
When configuring state and local taxes, you have two options to identify the jurisdiction.
For this method |
This is what you do |
---|---|
Fast formula |
In cases where you're defining a state or local tax for a single jurisdiction, you can set the jurisdiction through fast formulas. When you define the base element of the tax deduction, the element template creates the following fast formulas.
Modify these formulas to derive the jurisdiction. For further info, see Define the State and Local Tax Jurisdiction Through Fast Formula in the Help Center. |
Element entry |
In cases where you're defining a tax for use with multiple jurisdictions, you can enter the jurisdiction and rate details on the element entry.
For further info, see Define the State and Local Tax Jurisdiction Through Element Entry in the Help Center. |
Configure the Balances
Balance configuration for state and local taxes involves activities in the following areas.
-
Define the balance
-
Define the balance dimension
-
Configure the balance for tax filing
How You Define the Balance
Use the Balance Definitions task to define any balances required for the tax and establish their feeds.
In most cases, the following balances are required for a tax. There can be scenarios where one or more aren't.
Balance name |
What this is |
---|---|
Withheld or Liability |
Calculated tax amount for the US state or local tax. |
Reduced Subject Wages |
Wages or salary used to calculate the withheld or liability amount for this tax. |
Total Wage or Gross |
Total wages or gross pay. |
Taxable Wages |
Taxable wages, which can vary based on the wage basis rules. Because the payroll process currently doesn't have wage basis rules for local taxes, it uses the state wage-basis rules instead. If the state wage-basis rules are incompatible with your local tax, you must define your own local wage-basis rules. For further info, see Human Resources Cloud Implementing Payroll for the United States in the Help Center. |
The configuration of these balances varies according to each state or local tax's requirements. Refer to the appropriate tax authority for more info.
You must ensure that you have defined the correct balance feeds for these balances.
How You Define the Balance Dimension
When you create the four balance definitions described in the previous section, you must define them with the balance dimensions appropriate for the tax's archive level. The tax-filing processes consume the balances dimensions at the payroll relationship level. You must define the dimensions at the Relationship Tax Unit level as noted in the following table.
For example, for a tax that's at the City level, use the City archive-level balance definitions.
The BASE_DIMENSION_NAME refers to the Global Payroll Name. You would see the TL_DIMENSION_NAME in the Balance Definitions task.
Archive level |
BASE_DIMENSION_NAME |
DBI suffix |
TL_DIMENSION_NAME |
---|---|---|---|
Federal |
Core Relationship Tax Unit Run |
_REL_TU_RUN |
Relationship Tax Unit Run |
Federal |
Core Relationship Tax Unit Payslip |
_REL_TU_PAYSLIP |
Relationship Tax Unit Payslip |
Federal |
Core Relationship Tax Unit Year to Date |
_REL_TU_YTD |
Relationship Tax Unit Year to Date |
Federal |
Core Relationship Tax Unit Quarter Year to Date |
_REL_TU_QTD |
Relationship Tax Unit Quarter Year to Date |
State |
Core Relationship Tax Unit,Area1 Run |
_REL_TU_STATE_RUN |
Relationship Tax Unit,State Run |
State |
Core Relationship Tax Unit, Area1 Payslip |
_REL_TU_AR1_PAYSLIP |
Relationship Tax Unit, Area1 Payslip |
State |
Core Relationship Tax Unit,Area1 Year to Date |
_REL_TU_STATE_YTD |
Relationship Tax Unit,State Year to Date |
State |
Core Relationship Tax Unit,Area1 Quarter Year to Date |
_REL_TU_STATE_QTD |
Relationship Tax Unit,State Quarter Year to Date |
County |
Core Relationship Tax Unit,Area1,2 Run |
_REL_TU_COUNTY_RUN |
Relationship Tax Unit,County Run |
County |
Core Relationship Tax Unit, Area1,2 Payslip |
_REL_TU_AR12_PAYSLIP |
Relationship Tax Unit, Area1,2 Payslip |
County |
Core Relationship Tax Unit,Area1,2 Year to Date |
_REL_TU_COUNTY_YTD |
Relationship Tax Unit,County Year to Date |
County |
Core Relationship Tax Unit,Area1,2 Quarter Year to Date |
_REL_TU_COUNTY_QTD |
Relationship Tax Unit,County Quarter Year to Date |
City |
Core Relationship Tax Unit,Area1,2,3 Run |
_REL_TU_CITY_RUN |
Relationship Tax Unit,City Run |
City |
Core Relationship Tax Unit, Area1,2,3 Payslip |
_REL_TU_AR123_PAYSLIP |
Relationship Tax Unit, Area1,2,3 Payslip |
City |
Core Relationship Tax Unit,Area1,2,3 Year to Date |
_REL_TU_CITY_YTD |
Relationship Tax Unit,City Year to Date |
City |
Core Relationship Tax Unit,Area1,2,3 Quarter Year to Date |
_REL_TU_CITY_QTD |
Relationship Tax Unit,City Quarter Year to Date |
School District |
Core Relationship Tax Unit,Area1,4 Run |
_REL_TU_SCHOOL_RUN |
Relationship Tax Unit,School Run |
School District |
Core Relationship Tax Unit, Area1,4 Payslip |
_REL_TU_AR14_PAYSLIP |
Relationship Tax Unit, Area1,4 Payslip |
School District |
Core Relationship Tax Unit,Area1,4 Year to Date |
_REL_TU_SCHOOL_YTD |
Relationship Tax Unit,School Year to Date |
School District |
Core Relationship Tax Unit,Area1,4 Quarter Year to Date |
_REL_TU_SCHOOL_QTD |
Relationship Tax Unit,School Quarter Year to Date |
How You Configure the Balance for Tax Filing
Use the Enterprise HCM Information task to configure the balances you have defined. Include them in the periodic or quarterly tax filing extract.
For each balance you defined:
-
From My Client Groups, click Workforce Structures.
-
Click Manage Enterprise HCM Information.
-
Go into Edit mode.
-
In US Balance Definition, click Add Row.
-
Enter the following values.
Field name
What you enter
Legislative Data Group Name
Select a US legislative data group.
Archive Level
Select the archive level appropriate to the level of the balance.
Note: Don't select Federal for any local taxes. Use Federal for balances with no area contexts, such as taxes that don't apply to the state, county, city or school district levels.Category
Select the category to match the balance.
For example, if the category is Withheld or Liability, then the balance name in the next field must be the balance for the actual calculated tax withheld or liability.
To include the new tax in the third-party tax files, it usually would need four rows in this table, one for each category.
-
Withheld or Liability
-
Reduced Subject Wages
-
Total Wage or Gross
-
Taxable Wages
Balance Name
Select the balance's name.
Tax Code
Enter the tax code. This code is user-defined, and the payroll process doesn't validate it. You must ensure its accuracy and uniqueness.
The following formatting rules apply according to the tax level.
-
Federal
Any alphanumeric value up to 15 characters. Nothing is prefixed to this value.
-
State
Any alphanumeric value, up to 13 characters. The 2-character state postal code is automatically prefixed to this value.
-
County
Any alphanumeric value, up to 10 characters. The 2-character state postal code and 3-character county geocode are automatically prefixed to this value.
-
City
Any alphanumeric value, up to 6 characters. The 2-character state postal code, 3-character county geocode, and 4-character city geocode are automatically prefixed to this value.
-
School District
Any alphanumeric value, up to 8 characters. A 2-character state postal code and 5-character school geocode are automatically prefixed to this value.
Note:-
Advise your tax-filing account manager of this code, so they can properly uptake it for their processing of the local tax.
-
If you're using this tax type for only periodic reporting (Periodic report usage), this field isn't used.
You can enter any value here.
-
Use the same tax code for each of the four balance categories described above.
Type
Select Balance.
Report Usage
Select the reporting type for this tax.
Select Periodic and Quarterly to capture the tax data in the periodic archive. For use in periodic and quarterly tax filing.
Select Periodic to capture the tax data in the periodic archive only. For use with configured reports.
Note: If you select a balance for archival that's already being archived (such as a predefined balance), the balance is archived twice. -
-
Repeat for each balance you defined for the new tax.
To include this tax in the third-party tax files, your US Balance Definition table requires these rows. Create one for each category with the same tax code.
-
Withheld or Liability
-
Reduced Subject Wages
-
Total Wage or Gross
-
Taxable Wages
-
-
Click Submit.
Prepare for Third-Party Reporting
After you create and configure the local taxes, configure the Third-Party Tax Filing Interface to include them in the periodic tax filing and quarterly tax filing extracts.
Work with your third-party provider to ensure those taxes are filed and paid.
For further info, see Oracle Cloud Human Capital Management for United States: Third-Party Tax Filing Interface (1594079.1) on My Oracle Support.