State Unemployment Tax Act (SUTA)

The State Unemployment Tax Act (SUTA) is a state-level payroll tax that employers are required to pay to fund state unemployment insurance (UI) programs. These programs provide temporary financial assistance to eligible workers who have lost their jobs through no fault of their own. The tax rate and wage base vary by state and can be influenced by the employer’s industry, experience rating, and the state’s current unemployment fund status. In some states, employees may also contribute.

Key Facts

• Employer Responsibility: Employers are generally required to pay SUTA taxes, though in a few states, employees also contribute.
• Rate Variation: Tax rates and wage limits differ from state to state and may adjust annually.
• Experience Rating: Employers with more layoffs typically have higher SUTA tax rates.
• Federal Coordination: SUTA works in conjunction with the Federal Unemployment Tax Act (FUTA) to support unemployment benefits.
• Compliance Requirement: Employers must file SUTA tax returns quarterly and keep detailed records for audit purposes.

1. Who pays SUTA tax?

Employers pay SUTA tax in every state, and in a few states (like Alaska, New Jersey, and Pennsylvania), employees may also be required to contribute.

2. How is the SUTA tax rate determined?

The rate is based on factors such as the employer’s industry, their history of unemployment claims (experience rating), and the state's overall fund health.

3. What is the SUTA wage base?

It’s the maximum amount of an employee’s wages that are subject to SUTA tax - this amount is set by each state and often changes annually.

4. Is SUTA related to FUTA?

Yes, both taxes fund unemployment insurance programs - SUTA supports state-level programs, while FUTA supports the federal oversight and funding mechanism.

5. What happens if an employer doesn’t pay SUTA taxes?

Failure to pay can result in penalties, interest, and loss of credit on FUTA taxes, increasing the overall cost to the employer.