Frequently Asked Questions
- Civilian federal employees subject to the state tax and whose regular place of federal employment is within the state
- U.S. Armed Forces subject to the state tax and who are legal residents of the state
State statute must:
- Provide for collection of a tax either by imposing on employers generally the duty of withholding sums from employees’ pay and making returns of these sums to the state, AND
- Impose duty to withhold generally with respect to pay of employees who are state residents
- Withholding applies prospectively (i.e., does not apply to delinquent taxes owed by employee)
- State statute cannot impose more burdensome requirements on the USA than on other employers, and they cannot subject the USA or its employees to penalty/liability because of the program. Requirements are applicable to both mandatory and voluntary withholding
- States, cities, or counties MUST have 500 Federal employees regularly employed within the city and subject to the city tax.
States, cities, or counties who do not have an existing agreement with the Secretary and wish to enter into an agreement shall indicate in a letter its consent to be bound by the provisions of Subpart C of 31 CFR Part 215.
Assistant Commissioner, Payment Management, Bureau of the Fiscal Service, Department of the Treasury, 401 14th Street, SW., Room 427, Washington, DC 20227.
The letter shall be signed by an officer authorized to bind contractually the state, city, or county. Copies of all applicable state laws, city or county ordinances and implementing regulations, instructions, and forms must be included with the letter. The letter shall also indicate the title and address of the official whom federal agencies may contact to obtain forms and other information necessary to implement withholdings.
- A state, city or county must include copies of all applicable state laws, city or county ordinances and implementing regulations, instructions, and forms.
- The letter shall also indicate the title and address of the official whom federal agencies may contact to obtain forms and other information necessary to implement withholding.
- A state, city or county must include a list of federal agencies, addresses and phone numbers who will be affected.
Treasury will provide a response within 120 days of the receipt of the letter from the state, city, or county official.
The Secretary will, by letter, notify the state, city, or county:
- That a Withholding Agreement has been entered into as of the date of the Secretary’s letter, or
- That a Withholding Agreement cannot be entered into with the state, city, or county and the reason for that determination.
The withholding of the State, city or county income or employment tax shall commence within 90 days after the effective date of the agreement.
State statute must:
- Grant employers generally the authority to withhold sums from employees pay if any employee voluntarily elects to have such sums withheld, AND
- Grant authority to withhold generally with respect to the pay of employees who are state residents
- Withholding applies prospectively (i.e., does not apply to delinquent taxes owed by employee)
- State statute cannot impose more burdensome requirements on the USA than on other employers and cannot subject the USA or its employees to penalty/liability because of the program.