© 2022 American Payroll Institute, Inc. Make Sure You Are in Compliance With Local Payroll Tax Requirements While payroll professionals are typically aware they are subject to tax audits from federal and state authorities, they are sometimes surprised to learn they also can be subject to audits by local tax authorities. To make sure you are in compliance, the chart below summarizes local payroll taxes and whether the employer or employee is subject to them. This information comes from APA’s course, Local Income Tax Compliance. This year, it will be offered as an Interactive Virtual one-day webinar, a live four-segment webinar, and a webinar on demand series. Additional resources, including agency guidance and sample forms, also will be available in the 2023 edition of APA’s Guide to Local Payroll Taxes (online and as a softcover book). State Type of Tax Who Pays It Rate AL City/town and county occupational license fees (30 cities and towns and 1 county Macon County) Employee withholding tax Ranges from 0.5% to 3% of compensation CA Sacramento Business Operations Tax Employer doing business in city $30 + $0.0004 per dollar of gross receipts over $10,000 per reporting period, up to $5,000 per year (sales and services administrative headquarters) San Francisco Administrative Office Tax Employer doing business in city if: (1) more than 50% of payroll expense relates to providing administrative or management services exclusively to its own business and (2) more than 1,000 U.S. employees and over $1 billion in gross receipts 1.4% of payroll in San Francisco (+ 1.5% homelessness gross receipts tax) San Francisco Overpaid Executive Tax on Administrative Offices Employers subject to San Francisco Administrative Office Tax with executive pay ratio exceeding 100:1 0.4%–2.4% on payroll expense in San Francisco CO City occupational privilege taxes (5 cities Denver and surrounding cities of Aurora, Glendale, Greenwood Village, and Sheridan) Employee withholding tax and employer matching tax $2–$5.75 per month for employee $2–$5 per month (per employee) for employer DE Wilmington Earned Income Tax Employee withholding tax 1.25% of compensation Wilmington Business License Head Tax Employer doing business in city $15 per month per employee (in excess of 5) working in city IN County Local Income Tax for all 92 counties Employee withholding tax 0.5%–3% of employee income earned in county KY City, county, and school district occupational license taxes (more than 240 localities) Employee withholding tax school district occupational license tax applies only to residents within that school district for work performed in that county Varies some have annual wage caps (usually up to social security wage base, which is $147,000 for 2022) MD County and Baltimore City income taxes (23 counties and city of Baltimore) Employee withholding tax 2.25%–3.2% of resident income subject to state income tax 2.25% for nonresidents MI City income taxes (24 cities) Employee withholding tax 1%–2.4% of taxable wages for residents (max rate city can set is 3%) and 0.5%–1.2% of taxable wages for nonresidents (rate is half of resident rate) September 19, 2022 Volume 24 Issue 18
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