State Tax Withholding Rules

Vertex provides the tax rule data that determines:

What resident state taxes the payroll process withholds for employees
When it withholds them

Each state has its own withholding and reciprocity rules. For further info about each state's default behavior, see Calculation Guide for the United States Vertex Payroll Tax Q Series.

These tax withholding rules determine the available resident wage accumulation rules. The federal and state withholding forms provide the default tax withholding info for the payroll process.

Here's how you can change these rules.

What you want to do	How you do it
Define default state and local withholding	By default, the payroll process calculates state and local deductions based on the definitions provided by Vertex. For further info, see the Vertex Payroll Tax Calculation Guide for the United States. To override these values for your organization: Start the Legal Entity Calculation Cards or Legal Reporting Unit Calculation Cards tasks. Set the overrides. Use the Calculation Cards task to configure employee tax cards. Click Create Default State and Local Withholding to define regional components based on organization card defaults.
Set the state and resident wage accumulation rules at the organization level	Start the Legal Entity Calculation Cards or Legal Reporting Unit Calculation Cards task. Select which resident wage accumulation rule the payroll process uses when calculating state income taxes (SIT).
Set the state and resident wage accumulation rules for individual employees	Use the Calculation Cards task to set resident wage accumulation rules at the state and local levels on the employee's tax card. This overrides the value you set at the organization level.

What you want to do

How you do it

Define default state and local withholding

By default, the payroll process calculates state and local deductions based on the definitions provided by Vertex.

For further info, see the Vertex Payroll Tax Calculation Guide for the United States.

To override these values for your organization:

Start the Legal Entity Calculation Cards or Legal Reporting Unit Calculation Cards tasks.
Set the overrides.
Use the Calculation Cards task to configure employee tax cards.
Click Create Default State and Local Withholding to define regional components based on organization card defaults.

Set the state and resident wage accumulation rules at the organization level

Start the Legal Entity Calculation Cards or Legal Reporting Unit Calculation Cards task.
Select which resident wage accumulation rule the payroll process uses when calculating state income taxes (SIT).

Set the state and resident wage accumulation rules for individual employees

Use the Calculation Cards task to set resident wage accumulation rules at the state and local levels on the employee's tax card.

This overrides the value you set at the organization level.

For further info, see the following sections.

How You Define the Default State and Local Withholding

You can create regional components on a person's tax card that are based on their work and resident addresses.

Use the Calculation Cards task to open the person's Tax Withholding card for editing.
In Withholding Details, click Add Tax Withholding and select Create Default State and Local Withholding.

This automatically creates the regional components based on the employee's home and work locations.

You can find this value	In this task
Home Address	Person
Resident Tax Address	Person
Location	Employment
Working at Home	Employment
Work Tax Address	Employment

How You Can Add Tax Withholding Info

You can manually add any appropriate State, County, and City components to a person's tax card. These components help identify and configure the relevant states in the Calculation Card Overview region of the card.

Use the Calculation Cards task to open the person's Tax Withholding card for editing.
In Withholding Details, click Add Tax Withholding and select Add Withholding Information.
Use the State, County, and City fields to search for the appropriate jurisdictions. Select the locations you require, and migrate them into the Selected box.
Click Apply when finished.

How You Can Set the State Resident Wage Accumulation Rule

You can select which resident wage accumulation rule the payroll process uses when calculating SIT.

What you want to do	How you do it
Set the rule on a payroll statutory unit (PSU)	Start the Legal Entity Calculation Cards task, and open the organization calculation card for editing. In Component Groups, select Regional. In Calculation Components, select State Income Tax. In Calculation Component Details, expand State Income Tax Organization Information. Click Edit and then either Update or Correct. Select the appropriate value for Resident Wage Accumulation. For further info, see the following section. Click Save and Close.
Set the rule on a tax reporting unit (TRU)	Start the Legal Reporting Unit Calculation Cards task, and open the organization calculation card for editing. In Component Groups, select Regional. In Calculation Components, select State Income Tax. In Calculation Component Details, expand State Income Tax Organization Information. Click Edit and then either Update or Correct. Select the appropriate value for Resident Wage Accumulation. For further info, see the following section. Click Save and Close. This overrides any values on the parent PSU card.
Set the rule for an individual employee	Start the Calculation Cards task, and open the person's Tax Withholding card for editing. In Withholding Details, select the link for the appropriate state. Click Edit and then Update or Correct. In State Tax Additional Information, select the appropriate value for Resident Wage Accumulation. Click Save and Close. This overrides any values on the PSU or TRU cards.

What you want to do

How you do it

Set the rule on a payroll statutory unit (PSU)

Start the Legal Entity Calculation Cards task, and open the organization calculation card for editing.
In Component Groups, select Regional.
In Calculation Components, select State Income Tax.
In Calculation Component Details, expand State Income Tax Organization Information.
Click Edit and then either Update or Correct.
Select the appropriate value for Resident Wage Accumulation. For further info, see the following section.
Click Save and Close.

Set the rule on a tax reporting unit (TRU)

Start the Legal Reporting Unit Calculation Cards task, and open the organization calculation card for editing.
In Component Groups, select Regional.
In Calculation Components, select State Income Tax.
In Calculation Component Details, expand State Income Tax Organization Information.
Click Edit and then either Update or Correct.
Select the appropriate value for Resident Wage Accumulation. For further info, see the following section.
Click Save and Close.

This overrides any values on the parent PSU card.

Set the rule for an individual employee

Start the Calculation Cards task, and open the person's Tax Withholding card for editing.
In Withholding Details, select the link for the appropriate state.
Click Edit and then Update or Correct.
In State Tax Additional Information, select the appropriate value for Resident Wage Accumulation.
Click Save and Close.

This overrides any values on the PSU or TRU cards.

When using the Only states under state tax rules withholding rule for federal income tax (FIT), select the appropriate Resident Wage Accumulation rule for each state.

If you're using this FIT withholding rule	It does this	And you can select this for Resident Wage Accumulation
All states	Default withholding rule for all states.	The payroll process automatically withholds for all states using the default action for each state. This is described in the Calculation Guide for the United States Vertex Payroll Tax Q Series.
Only states under state tax rules	From the states you have configured on the card, this identifies which you're withholding resident taxes. For each state you add, you select the appropriate resident wage accumulation rule. Note: If you select an invalid rule, the card uses the default rule.	Select one. Calculate tax independent of all other jurisdictions Credit resident tax by work tax, accumulate wages if taxed Credit resident tax by work tax, always accumulate wages No resident tax if work or residence mismatch, accrue if taxed No resident tax if work tax greater than zero No resident tax if work tax greater than zero, always accrue No resident tax if work tax on nonresident, accrue if taxed No resident tax if work tax on nonresident, always accrue Use default action For further info, see Calculation Guide for the United States Vertex Payroll Tax Q Series.

If you're using this FIT withholding rule

It does this

And you can select this for Resident Wage Accumulation

All states

Default withholding rule for all states.

The payroll process automatically withholds for all states using the default action for each state. This is described in the Calculation Guide for the United States Vertex Payroll Tax Q Series.

Only states under state tax rules

From the states you have configured on the card, this identifies which you're withholding resident taxes. For each state you add, you select the appropriate resident wage accumulation rule.

Note: If you select an invalid rule, the card uses the default rule.

Select one.

Calculate tax independent of all other jurisdictions
Credit resident tax by work tax, accumulate wages if taxed
Credit resident tax by work tax, always accumulate wages
No resident tax if work or residence mismatch, accrue if taxed
No resident tax if work tax greater than zero
No resident tax if work tax greater than zero, always accrue
No resident tax if work tax on nonresident, accrue if taxed
No resident tax if work tax on nonresident, always accrue
Use default action

For further info, see Calculation Guide for the United States Vertex Payroll Tax Q Series.

For further info, see Oracle Cloud Human Capital Management for United States: Courtesy Tax Implementation (2138998.1) on My Oracle Support.