1. Administering Payroll for the United States
  2. State and Local Taxes

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

Note: For further info, see Oracle Cloud Human Capital Management for United States: State and Local Tax Configuration (2056960.1) on My Oracle Support.

Defining state and local taxes involves several steps.

  1. Verify the Tax with your tax-filing provider.

  2. Configure the deduction element.

  3. Identify the jurisdiction.

  4. Configure the balances.

  5. 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.

  • <name> Tax_CHG_DEDN

  • <name> CHG_DEDN_CALCULATOR

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.

  1. Configure the fast formulas to derive the jurisdiction.

    When you define the base element of the tax deduction, the element template creates the following fast formulas.

    • <name> Tax_CHG_DEDN

    • <name> CHG_DEDN_CALCULATOR

  2. Configure element entry to pass the jurisdiction and applicable tax rate.

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.

  1. Define the balance

  2. Define the balance dimension

  3. 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.
Note: Don't use the predefined Gross Earnings balance as part of the balances you configure at the enterprise level. This would result in incorrect tax codes.

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:

  1. From My Client Groups, click Workforce Structures.

  2. Click Manage Enterprise HCM Information.

  3. Go into Edit mode.

  4. In US Balance Definition, click Add Row.

  5. 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.

  6. 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

  7. 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.

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