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US STATE RECIPROCITY#

Overview#

This page describes the US State Reciprocity using the Symmetry Tax Engine (STE) software.

State Reciprocity#

Reciprocity#

When employees live in a different state than the one where they work or if someone performs services in more than one state, the withholding rules can become quite complicated. There are reciprocal withholding agreements between states which must be considered and in the absence of those agreements, the "Nexus" or business connection between the company and the state where the employee resides must also be factored into the equation. Symmetry Tax Engine maintains a list of all the reciprocal agreements between the states. Using the setNexus method, this will provide a list of the nexus relationships for the employer. Based upon the residency of the employee, the locations where the employee worked, the nexus relationships of the employer, and the status of the employee having filed a Certificate of Non-Residency, the STE will determine the correct locations where taxes should be withheld.

In addition, a state may decide to withhold taxes on a resident employee who works in a different state if that state does not have a state withholding tax or does not require withholding on nonresidents (e.g. District of Columbia). Also, states may require that tax be withheld on employees working in a different (nonresident) state. In this situation, a state may allow credit for the tax which is withheld in the nonresident work state. The nonresident work state tax would be subtracted from the tax computed for the resident state. The default value for all nexus settings is false. In order to indicate the nexus relationship of the employer to an individual state, the Nexus for each State must be set.

The STE uses the flow chart on the following pages to determine which taxes to withhold in a multi-state scenario. STE begins by identifying the Resident State of the employee. STE then loops through all the Non-Resident States to determine how withholding will occur. There are 5 possibilities:

1. Withhold only in the resident state
2. Withhold only in the nonresident state
3. No withholding in either the resident or nonresident state
4. Withhold the full amounts in both the resident and nonresident state
5. Withhold the full amount in the nonresident state. If the calculated tax in the resident state on the same wages is greater than the calculated tax in the nonresident state, withhold the difference in the resident state.

In situations where the withholding occurs in the Resident State, STE will take the wages and benefits assigned to the Non-Resident state and add them to the Resident State totals in order to perform the calculation.

The flow chart on next page refers to some specific data for each state under consideration. These factors are presented in a table following the flow chart. The factors are:

• Does the state have a reciprocal agreement in place with other states?
• Does the state have a tax?
• Does the state withhold on nonresidents?
• Does the state withhold on residents working outside the state?
• Does the state withhold if the nonresident state does not require withholding?
• Does the state allow credit for nonresident state withholding?

State Withholding Flowchart#

Multi-State Reciprocity Flowchart#

Symmetry uses this flow chart to determine which taxes are to be withheld in a multi-state scenario.

US_Audit_Pay_Rules_01.JPG

US_Audit_Pay_Rules_02.JPG

Cross States Reciprocity Table#

States with Res / Non-Res Tax#

The following table (as of January 2011) shows the values used by STE for the multi-state withholding algorithm.

State	Has State Tax	Withhold on Nonresidents	Withhold on Residents Working Out of State	Withhold if Nonresident State Does Not Require Withholding	Allow Credit for Nonresident State Withholding	Reciprocal States
AL	TRUE	TRUE	FALSE	TRUE	FALSE
AK	FALSE	FALSE	FALSE	FALSE	FALSE
AR	TRUE	TRUE	FALSE	TRUE	FALSE
AS	FALSE	FALSE	FALSE	FALSE	FALSE
AZ	TRUE	TRUE	FALSE	FALSE	FALSE
CA	TRUE	TRUE	TRUE	TRUE	TRUE
CO	TRUE	TRUE	FALSE	TRUE	FALSE
CT	TRUE	TRUE	TRUE	TRUE	TRUE
DC	TRUE	FALSE	TRUE	TRUE	FALSE	MD, VA
DE	TRUE	TRUE	TRUE	TRUE	TRUE
FL	FALSE	FALSE	FALSE	FALSE	FALSE
GA	TRUE	TRUE	FALSE	TRUE	FALSE
GU	FALSE	FALSE	FALSE	FALSE	FALSE
HI	TRUE	TRUE	TRUE	TRUE	FALSE
IA	TRUE	TRUE	TRUE	TRUE	FALSE	IL
ID	TRUE	TRUE	FALSE	FALSE	FALSE
IL	TRUE	TRUE	FALSE	TRUE	FALSE	IA,KY,MI,WI
IN	TRUE	TRUE	TRUE	TRUE	FALSE	KY,OH,PA,WI
KS	TRUE	TRUE	TRUE	TRUE	TRUE
KY	TRUE	TRUE	TRUE	TRUE	FALSE	IL,IN,MI,OH,WV,WI,VA
LA	TRUE	TRUE	FALSE	TRUE	FALSE
MA	TRUE	TRUE	TRUE	TRUE	TRUE
MD	TRUE	TRUE	TRUE	TRUE	FALSE	DC,PA,VA,WV
ME	TRUE	TRUE	TRUE	TRUE	FALSE
MI	TRUE	TRUE	TRUE	TRUE	FALSE	IL,IN,KY,MN,OH,WI
MN	TRUE	TRUE	TRUE	TRUE	TRUE	MI,ND
MO	TRUE	TRUE	FALSE	TRUE	FALSE
MP	FALSE	FALSE	FALSE	FALSE	FALSE
MS	TRUE	TRUE	FALSE	TRUE	FALSE
MT	TRUE	TRUE	TRUE	TRUE	FALSE	ND
NC	TRUE	TRUE	FALSE	TRUE	FALSE
ND	TRUE	TRUE	FALSE	TRUE	FALSE
NE	TRUE	TRUE	TRUE	TRUE	TRUE
NH	FALSE	FALSE	FALSE	FALSE	FALSE
NJ	TRUE	TRUE	TRUE	TRUE	TRUE	PA
NM	TRUE	TRUE	TRUE	TRUE	FALSE
NV	FALSE	FALSE	FALSE	FALSE	FALSE
NY	TRUE	TRUE	TRUE	TRUE	TRUE
OH	TRUE	TRUE	TRUE	TRUE	FALSE	IN,KY,MI,PA,WV
OK	TRUE	TRUE	TRUE	TRUE	FALSE
OR	TRUE	TRUE	TRUE	TRUE	FALSE
PA	TRUE	TRUE	FALSE	TRUE	FALSE	IN,MD,NJ,OH,VA,WV
PR	TRUE	TRUE	TRUE	TRUE	FALSE
RI	TRUE	TRUE	TRUE	TRUE	FALSE
SC	TRUE	TRUE	FALSE	TRUE	FALSE
SD	FALSE	FALSE	FALSE	FALSE	FALSE
TN	FALSE	FALSE	FALSE	FALSE	FALSE
TX	FALSE	FALSE	FALSE	FALSE	FALSE
UT	TRUE	TRUE	TRUE	TRUE	TRUE
VA	TRUE	TRUE	TRUE	TRUE	TRUE	DC,KY,MD,PA,WV
VI	FALSE	FALSE	FALSE	FALSE	FALSE
VT	TRUE	TRUE	TRUE	TRUE	TRUE
WA	FALSE	FALSE	FALSE	FALSE	FALSE
WI	TRUE	TRUE	TRUE	TRUE	FALSE	IL,IN,KY
WV	TRUE	TRUE	TRUE	FALSE	TRUE	KY,MD,OH,PA,VA
WY	FALSE	FALSE	FALSE	FALSE	FALSE

Nexus Relationship Set Up#

IPUTP – STATE_NEXUS#

When UPUTR is run, the Miscellaneous Identifier STATE_NEXUS will be generated with the value of DEFAULT for the selected States.

US_Audit_Pay_Rules_03.JPG

STATE_NEXUS - indicates if the State Nexus Relationship exist for the State

DEFAULT -The Default Nexus Relationship is used YES -Nexus Relationship exists NO -Nexus Relationship does not exist

This IPUTP STATE_NEXUS Miscellaneous Identifier is applicable for the entire Company for the State defined.

If the Company has no specific requirement for Nexus Relationship at the State or Local level, there is no more set up required for Nexus Relationship.

If the Company has multiple Entities or State Registrations that require to set up different State Nexus Relationship, user must set up IDGV by State Registration. The IDGV State Nexus set up overrides the IPUTP set up.

If the Company has multiple Local Registrations that require to set up different Local Nexus Relationship, user must set up IDGV by Local Registration. The IDGV Local Nexus set up overrides the State Nexus set up.

IDGV – Nexus by State Registration#

If the Company has multiple Entities or State Registrations that require to set up different State Nexus Relationship, user must set up on IDGV screen, this set up overrides the IPUTP STATE_NEXUS set up. If IDGV is not set up, the IPUTP set up is used.

Registration Type - must enter one of ‘US State Regist 1’ or ‘US State Regist 2’ up to ‘US State Regist 9’ - the last digit of ‘US State Regist n’ matches the last digit of IDGR State Regist Type.

Govt Rate Type - must enter lexicon value of ‘US State Nexus Relationship’ - from lexicon X_GOVT_RATE_TYPE 024003 - US State Nexus Relationship

Effective / Expiry - enter applicable Effective / Expiry dates

Amount - indicates if the State Nexus Relationship exist for the State Registration - enter one of the following applicable Nexus Relationship values:

0 – Use IPUTP STATE_NEXUS set up 1 – means YES, Nexus Relationship exists for the State Registration 99 – means NO, Nexus Relationship does not exist for the State Registration

IDGV – Nexus by Local Registration#

If the Company has multiple Entities or Local Registrations that require to set up different Local Nexus Relationship, user must set up on IDGV screen, this set up overrides the IDGV State Nexus and IPUTP STATE_NEXUS set up. If IDGV Local Nexus is not set up, the IDGV State Nexus set up is used.

Registration Type - must enter one of ‘US Local Regist 1’ or ‘US Local Regist 2’ up to ‘US Local Regist 9’ - the last digit of ‘US Local Regist n’ matches the last digit of IDGR Local Regist Type.

Govt Rate Type - must enter lexicon value of ‘US Local Nexus Relationship’ - from lexicon X_GOVT_RATE_TYPE 027014 - US Local Nexus Relationship

Effective / Expiry - enter applicable Effective / Expiry dates

Amount - indicates if the Local Nexus Relationship exist for the Local Registration - enter one of the following applicable Nexus Relationship values:

0 – Use IDGR State Nexus or IPUTP STATE_NEXUS set up 1 – means YES, Nexus Relationship exists for this Local 99 – means NO, Nexus Relationship does not exist for this Local

IPRLU – State Reciprocity Agreement#

On IPRLU STATE Tab, an employee should set up the ‘Reciprocity Agreement’ if applicable.

From Lexicon X_UST_RECIPROCATION 00 – Default (PPH Work/Res GEO) 01 – NR Certificate Filed 02 – Calc WORK Tax (PPH Work GEO) 03 – Calc RES Tax (PPH Home GEO) 04 – Calc WORK / RES (PPH 2 States)

- If IPRLU ‘Reciprocity Agreement’ is not set up, the IMST Site Preference US TAX RECIP will be used. - IMST Site Preference ‘US TAX RECIP’ has the same values from lexicon X_UST_RECIPROCATION as above.

1) 00 – Default (PPH Work/Res GEO)

- Pay Lines Earnings are allocated according to Pay Header’s Work and Home Jurisdiction - if the Pay Line’s Tax Jurisdiction is the same as Pay Header’s Home Jurisdiction, this Pay Line’s earnings is allocated to Pay Header’s Home Jurisdiction - if the Pay Line’s Tax Jurisdiction is NOT the same as Pay Header’s Home Jurisdiction, this Pay Line’s earnings is allocated to Pay Header’s Work Jurisdiction - if a Pay Line does not specify a Tax Jurisdiction, this Pay Line’s Earnings will be allocated to Pay Header’s Work Jurisdiction - the NonResCertificate = False when pass to Symmetry - the NEXUS is set according to IDGV or IPUTP set up

2) 01 – NR Certificate Filed

- Pay Line Earnings are allocated the same way as 00 –Default - the NonResCertificate = True when pass to Symmetry - the NEXUS is set according to IDGV or IPUTP set up

3) 02 – Calc WORK Tax (PPH Work GEO)

- All Pay Line Earnings are allocated according to Pay Header’s WORK Jurisdiction - the NonResCertificate = False when pass to Symmetry - the NEXUS will be set to YES for the WORK GEO, otherwise NEXUS will be set to NO

4) 03 – Calc RES Tax (PPH Home GEO)

- All Pay Line Earnings are allocated according to Pay Header’s HOME Jurisdiction - the NonResCertificate = False when pass to Symmetry - the NEXUS will be set to YES for the HOME GEO, otherwise NEXUS will be set to NO

5) 04 – Calc WORK / RES (PPH 2 States)

- same as 00 – Default (PPH Work/Res GEO)

Nexus Example#

Michigan City Tax – STATE_NEXUS - DEFAULT#

For employee with a residence in Michigan city which withholds tax, STE checks to insure the company has a Nexus relationship with the city before withholding the tax. STE automatically sets the nexus to TRUE when the wages are earned for the residence location. However, if the employee does not have wages in the residence location, the company needs to indicate the presence of a nexus relationship. If the nexus relationship is not set, then no withholding will occur in the Michigan resident location. For Michigan City, user can set up Nexus Relationship by each City on IDGV, if Local Nexus Relationship is not set up for that City, then the State Nexus Relationship will be used.

IPRLU STATE Tab Reciprocity Agreement: - Null, default to IMST, which uses Default Reciprocity IPUTP Michigan State STATE_NEXUS - DEFAULT IPUTP OHIO State STATE_NEXUS - DEFAULT IDGV ‘US State Regist 1’ Govt Rate Type - ‘US State Nexus Relationship’ is not set up IDGV ‘US Local Regist 1’ Govt Rate Type - ‘US Local Nexus Relationship’ is not set up

WORK: OH 39-049-1080996 Columbus, Franklin, OH RES: MI 26-107-1619197 Big Rapids, MI

IPPH PAY LINES Jurisdiction - 39-049-1080996 Columbus, Franklin, OH - All Earnings Jurisdiction - 26-107-1619197 Big Rapids, MI - NO Earnings

In this test, since IDGV State and Local Nexus are not set up, then IPUTP STATE_NEXUS for Michigan will be used. IPUTP for Michigan is set to DEFAULT Nexus Relationship, this means the Default Nexus will be passed to Symmetry with the Nexus Relationship = YES, therefore the Michigan Residence Earnings and Taxes are returned.

PC 8130 RCITY Earn 2564.10 PC 8131 RCITY SupEarn 1000.00 PC 6951 Res CITY Reg Tax 25.64 PC 6953 Res CITY Sup Tax 10.00

Michigan City Tax – STATE_NEXUS - NO#

IDGV MI ‘US State Regist 1’ Govt Rate Type - ‘US State Nexus Relationship’ is set up with Amount = 99 - this means Nexus Relationship does not exist

The Nexus Relationship is set to NO for Michigan, therefore the Michigan Residence Earnings and Taxes are NOT returned. User may optionally set up the IDGV Local Nexus Relationship to NO for Big Rapids City, the Michigan Residence Earnings and Taxes are NOT returned.

PC 8130 RCITY Earn 0 PC 8131 RCITY SupEarn 0 PC 6951 Res CITY Reg Tax 0 PC 6953 Res CITY Sup Tax 0

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Notes #

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