When an employee works in a new state, your company usually has to register for payroll tax in that state before the first paycheck. That means state income tax withholding (if the state has one) and state unemployment insurance, each with its own account, rates and deadlines.
It sneaks up on remote teams. You hire the right person, and the company picks up a new state at the same time. The rule of thumb: where the person does the work is where the payroll accounts go, not where the company is incorporated or based.
Say you run a Delaware C corp based in California. You hire a remote engineer who lives and works in Texas, and a sales rep who works from home in New York. Payroll now has three states in it, not one.
Being a Delaware company does not add Delaware to the list. What counts is where each person does the work.
Texas has no state income tax on wages, so there is nothing to withhold there. You still owe Texas unemployment tax, so you still register with the Texas Workforce Commission.
New York needs two accounts: one for income tax withholding and one for unemployment insurance.
Usually, yes. Most states expect you to register once you pay wages there, even for one person. California, for example, says to register within 15 days after you pay more than $100 in wages in a calendar quarter.
Withholding usually follows where the work is done. Some neighboring states have reciprocity agreements that let you withhold for the home state only. Check the two states involved before the first payroll.
Register now and fix it going forward. The state may ask for the back taxes, plus penalties and interest. It is usually cheaper to fix it early than to wait for a notice.
Hiring in a new state is the kind of thing we catch while we run your accounting back office. See if our accounting team is a fit →
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