What is SUTA Tax?

State Unemployment Tax Act

| Updated on May 21, 2024
Stephanie

Written by Stephanie Glanville

Stephanie Glanville is the Marketing Manager of TaxBandits. She has several years of experience with IRS tax forms and the funtionality of TaxBandits. With a passion to help business owners better understand their IRS tax forms and filing, she aims to create content that is valuable and informative.

A tedious task for employers is to understand the State Unemployment Tax Act(SUTA) because of the different tax rates in each state. Employers must ensure the states of their employees to calculate the SUTA tax for them. However, Neglecting FUTA can cause legal penalties. Keep on reading to understand more about the SUTA tax and its rates for each state.

Let's read more to know about the ins and outs of
FUTA taxes.

Key Takeways:

  • SUTA is the state payroll tax that funds the unemployed in the states.
  • The states decide SUTA tax rates, which vary for each state.
  • Only employers are responsible for paying SUTA tax.

What is the SUTA wage base?

SUTA wage base or taxable wage base is different for every state. SUTA wage base is determined using the following criteria:

  • Some states determine using the employee termination ratio of the state.
  • While others use a percentage of the state's average annual wage.
  • Some follow the FUTA wage base limit.

The SUTA wage base is the threshold for employee’s earnings if the employees earn below the wage base employers are responsible for paying the SUTA taxes for their states.

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