What is State Unemployment Insurance (SUI) tax?

If you have full-time employees, you likely have to pay SUI taxes to fund state unemployment insurance. The Federal Unemployment Tax Act (FUTA) requires it for every state where your company has employees. Your payroll provider will be responsible for remitting the amounts to the respective state agencies.

When a former employee claims unemployment insurance, they are typically provided with wage replacement pay from the state’s unemployment agency until the former employee has successfully found work or has reached the end of the time period allotted by the state.

Rates vary for SUI not only by state, but also by employer. Your SUI tax rate is specific to your business, and it’s based on the “wage base” set by each state, along with an “experience factor.” These rates can change annually. Each state in which you are registered will mail updated rates near the end of the current year or beginning of the following year.

State Unemployment Insurance (SUI) tax may also be referred to by a few other names, such as:

• SUTA (State Unemployment Tax Act) or SUTA tax
• Unemployment benefit tax
• Reemployment tax

In most states, employees are not responsible for funding SUI and so contributions are not typically withheld from employee wages. However, there are a few exceptions where employees are responsible for making SUI contributions. Those are:

• Alaska (AK)
• New Jersey (NJ)
• Pennsylvania (PA)

When an employee is hired in a state where you are not already registered, and the state has an applicable unemployment tax, you must register with the appropriate agency so the withheld amounts can be remitted.