Local Tax Overview - sfpayroll.org

1 Local Tax Overview Delaware, Michigan, New Jersey & New York Table of Contents General Local Tax Guidelines .. 1. How Are Local Taxes Calculated? .. 2. Delaware Guidelines .. 3. Michigan Guidelines .. 4. New Jersey Guidelines .. 5. New York Guidelines .. 6. Metropolitan Commuter Transportation Mobility Tax .. 7. Local Tax Quick Reference .. 8. i Revised 4/11/2012. APA Meeting, May 17, 2012 Delaware, Michigan, New Jersey, & New York Locals General Local Tax Guidelines If an employer is located in a jurisdiction that imposes a Local income tax, all employees that work in this location are required to pay this tax. In some localities, if employees live in a jurisdiction that also imposes a Local tax, the employee will be able to apply the amount paid for the worked-in tax to the lived-in tax jurisdiction. Generally, employers are required to withhold worked-in taxes. If employees are required to pay lived in taxes, it is the employer's option to withhold the additional lived-in taxes.

2 Employers may obtain an Employer Identification Number (EIN). from the employee's lived-in locality and withhold lived-in taxes. The employer is then accepting all responsibility for the deposits and filings to the resident locality. If employers do not withhold the lived-in taxes, it is the employee's responsibility to pay the lived-in taxes to the resident locality. 1. APA Meeting, May 17, 2012 Delaware, Michigan, New Jersey, & New York Locals How Are Local Taxes Calculated? Method 1 Local taxes are most often calculated as a percent of an employee's taxable wages. There are usually no limits on the amount to be withheld for Local taxes as there are for Social Security or FUTA\SUI\SDI. (Kentucky is an exception, with 9 locals that have limits). Method 2 Some localities, such as New York City, use the same factors as FIT and SIT to calculate Local tax. These factors can be: Gross Pay Marital Status Number of Exemptions Pay Frequency Method 3 Localities, such as Greenwood Village, Colorado, require both employer and employee to pay a flat dollar amount per month, after an employee earns a minimum amount in any given month.

3 This is an example of a flat dollar amount tax. Method 4 Many localities in Pennsylvania impose a Local Services Tax (LST), formerly known as the Occupational Privilege Tax (OPT) or Emergency Municipal Services Tax (EMST). This tax is calculated at a fixed dollar amount per year withheld from each payroll period throughout the year and applies only in the municipality where the employee works. 2. APA Meeting, May 17, 2012 Delaware, Michigan, New Jersey, & New York Locals Delaware Guidelines There is currently only one Local tax in Delaware for Wilmington, and it is a worked- in and lived-in Local tax. Employees that work in Wilmington are subject to Wilmington Local tax. Residents of Wilmington are also subject to this tax. The table below describes the employer's responsibility for Local taxes in Delaware: If an employer is and employees live then the employer must withhold the located in Wilmington in Wilmington Wilmington tax must withhold the located in Wilmington outside of Wilmington Wilmington tax must withhold the located in Wilmington outside of Delaware Wilmington tax located in Delaware must withhold the in Wilmington other than Wilmington Wilmington tax Can apply for an ID in the lived in jurisdiction and withhold the lived in tax.

4 Is located outside of or in Wilmington Delaware Can choose not to withhold the lived in tax and make employees responsible for the tax. The Wilmington web site has an address coding guide which lists all the addresses and streets within the corporate limits of the city of Wilmington. The address to this guide is For more information on Wilmington visit: Regulations: 3. APA Meeting, May 17, 2012 Delaware, Michigan, New Jersey, & New York Locals Michigan Guidelines The Local taxes in Michigan are both worked-in and lived-in. Employers, however, are required to withhold taxes for the locality in which wages are earned. If an employee lives in a jurisdiction that also imposes a Local tax, the employer can choose to withhold that tax as a courtesy to the employee or choose not to withhold that tax, making the employee responsible for paying that resident tax. If an employee works and lives in different localities, then both jurisdictions will allow a credit.

5 The following table further describes employer responsibility in Michigan: If an the employee Example Total Rate(s). employee will pay Withheld Lives and works in the full rate to the Works in Albion Pays to Albion the same city lived-in city. and Lives in Albion of the worked-in Works in Battle Creek Battle Creek Lives in a different city rate and of the but Lives in Jackson city than the lived-in city rate to ( of Battle Creek's worked-in city the lived-in city Jackson rate and of (possible exception). Jackson's rate) Total = Flint of the worked-in Lived-in city tax city rate and the Works in Flint but rate is greater difference to the Lives in Saginaw Saginaw than the worked-in lived-in city to equal ( of Flint's rate, subtract that from ( - paid to city tax rate the FULL lived-in city Flint). rate. Saginaw's rate). Total = of the worked-in Saginaw Worked-in city tax Works in Saginaw but tax rate to the rate is greater Lives in Flint worked-in city and at than the lived-in ( of Saginaw's rate Flint least to the lived-in tax rate and of Flint's rate) Total = city.

6 For a listing of Local web sites in Michigan, visit: 4. APA Meeting, May 17, 2012 Delaware, Michigan, New Jersey, & New York Locals New Jersey Guidelines The city of Newark has a Local tax, paid by the employer, which is based on wages earned within the city. Newark states that wages subject to federal withholding must be reported for any employees who: a. perform services within the city of Newark, or b. perform services that are supervised from within the city of Newark or c. report to a location within the city of Newark as their principal location of employment For more information, visit: 5. APA Meeting, May 17, 2012 Delaware, Michigan, New Jersey, & New York Locals New York Guidelines The Local taxes in New York are both worked-in and lived-in. There are only two cities that have taxes, New York City and Yonkers, and these taxes are remitted with the State Income Tax. The following table describes employer responsibility for New York and Yonkers taxes: then the employer must If an employee lives and works withhold In New York City anywhere New York City resident tax.

7 In Yonkers anywhere Yonkers resident tax In New York City Yonkers New York City resident tax and Yonkers non-resident tax Anywhere Yonkers Yonkers non-resident tax These rules apply to Yonkers as well as any of the five boroughs of New York City, which are: Manhattan Brooklyn Queens Staten Island Bronx For more information visit: For more information on New York's tax rates visit: The Withholding Tax Jurisdiction Lookup site can also be used to determine if an address falls within New York City or Yonkers: 6. APA Meeting, May 17, 2012 Delaware, Michigan, New Jersey, & New York Locals Metropolitan Commuter Transportation Mobility Tax The metropolitan commuter transportation mobility tax (MCTMT) is a tax imposed on certain employers and self-employed individuals engaging in business within the metropolitan commuter transportation district (MCTD). This department administers the tax for the Metropolitan Transportation Authority.

8 (The MCTD includes the counties of New York (Manhattan), Bronx, Kings (Brooklyn), Queens, Richmond (Staten Island), Rockland, Nassau, Suffolk, Orange, Putnam, Dutchess, and Westchester.). The tax applies to you if: you are located within the counties listed above and you are required to withhold New York State Income Tax from wages and Beginning with the second quarter, 2012 (4/1/12-6/30/12), if your payroll expense for the quarter: o Is $312,500 or less, you're not subject to the MCTMT for that quarter. o Exceeds $312,500, use the appropriate rate shown below. Payroll expense MCTMT Rate Over $312,500 but not over $375,000 .11% (.0011). Over $375,000 but not over $437,500 .23% (.0023). Over $437,500 .34% (.0034). For more information, visit: or 7. APA Meeting, May 17, 2012 Delaware, Michigan, New Jersey, & New York Locals Local Tax Quick Reference EE ER Worked Lived State Additional Information Paid Paid In In Alabama The Local taxes in Alabama are occupational license fees X X which must be withheld from employees working in the city or county.

9 Colorado The cities in Colorado impose an occupational tax on employees and employers X X X doing business in their city. This is a flat monthly tax paid by the employee and the employer. Delaware The city of Wilmington imposes a tax on employees working or living in the city. Employers doing business in Wilmington must withhold it X X X from their employees working in Wilmington and employers in the state of Delaware must withhold it from any Wilmington residents. Indiana The counties in Indiana impose a tax on residents and employers in the state of X X Indiana must withhold it from any Indiana residents. These Local taxes are filed with the Indiana state income tax. Kentucky The Local taxes in Kentucky are occupational license fees imposed by some cities and counties. Employers doing X X X business in a city and/or county with a tax must withhold the tax from any employees working there. Maryland The Local taxes in Maryland are withheld from residents of the cities and counties which X X impose a Local tax and are combined with the Maryland state income tax.

10 8. APA Meeting, May 17, 2012 Delaware, Michigan, New Jersey, & New York Locals Local Tax Quick Reference EE ER Worked Lived State Additional Information Paid Paid In In Michigan The Local taxes in Michigan are imposed on employees based on where they live and/or work. If they work and live in two different cities X X X which both impose a tax, they are allowed a credit in each. Employers are only obligated to withhold any worked-in taxes. Missouri Kansas City and St. Louis impose a tax on employees working in either city or living X X X X in either city. Employers must withhold this tax if they are doing business in either city. New Jersey The city of Newark imposes a X X tax on employers doing business in the city. New York Employers must withhold taxes from New York City and X X X Yonkers residents and from employees working in Yonkers. Ohio The Local taxes in Ohio are imposed on employees working and/or living in a city with a tax.