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Overview: State Unemployment Insurance (SUI), also known as State Unemployment Tax Act (SUTA), is a payroll tax typically funded by employers. It provides temporary wage replacement for employees who become unemployed through no fault of their own.

Employers pay SUI to the state where the employee would claim unemployment benefits. This is straightforward if the employee lives and works in one state. For employees working in multiple states, employers determine the primary SUI state using the IRS's "Localization of Work" rules, which consider factors like the employee's base of operations or where their work is directed.

Once determined, Buddy Punch allows employers to designate the employee's primary SUI state, ensuring accurate tax withholding. This guide outlines how to enter this information and the resulting impacts.

Instructions:

How are Taxes Affected by Primary Workplace

How to change an Employee's Primary Workplace?

Are Corrections Required?

SUI Taxable Wage Credits

Beyond SUI taxes, several other tax types follow the same "Localization of Work" rules and are tied to an employee's designated primary workplace. These include:

These taxes are only applied if the employee’s primary workplace is in the relevant state, regardless of wages earned elsewhere.

For example, if an employee works in both Washington and Oregon but has their primary workplace set in Washington, Oregon-specific taxes (e.g., SUI, PFML) will not apply. Instead, earnings from Oregon will be included in Washington's tax calculations.

Income taxes, however, are based on wages earned in each state and factors like reciprocity agreements.

To view or change the primary workplace for an employee in Buddy Punch, first navigate to that employee by going to Payroll --> People, scrolling down to Active Employees, and selecting the employee you wish to view.

On the Employee Info page, you'll click Edit:

Once on the Employee Info tab, scroll down to the workplaces section. To update it, click on the Workplace dropdown, select the new primary workplace from the list, and click Save.

If a change to the primary workplace needs to be retroactively applied, please contact Buddy Punch Support to ensure prior payrolls are recalculated correctly, as this is similar to adjusting the workplace where wages were earned in past payrolls.

For changes effective only moving forward, no correction is needed. However, future payrolls may include SUI Taxable Wage Credits, as outlined below.

When an employee's primary workplace — and SUI state — changes mid-year, most state unemployment agencies allow a taxable wage credit from the previous state to be applied to the new state. This helps reduce the employer's overall SUI tax burden.

For example, if an employee has earned $5,000 in taxable wages for Illinois SUI and then changes their primary workplace to Indiana, the $5,000 will apply as a credit toward Indiana's SUI wage base. If Indiana's wage base is $9,500, the employee will only need to earn an additional $4,500 for IN SUI instead of the full $9,500.

Different states may have varying rules for recognizing taxable wage credits, but Buddy Punch automatically incorporates these rules into our tax calculations, ensuring the credit is applied correctly.

Q: Are corrections needed for past payrolls?
​A: If the primary workplace change is retroactive, contact Buddy Punch Support for recalculating past payrolls. If it’s only for future payrolls, no correction is required.

Q: What are SUI taxable wage credits?
​A: When an employee changes primary workplace mid-year, taxable wages from the previous state can be credited toward the new state’s SUI wage base. Buddy Punch automatically applies this credit.

Q: Where can I find more resources?
Refer to IRS’s "Localization of Work" rules for more on determining the correct primary workplace.