According to recent data, about 24% of new job postings in Q2 2025 are hybrid, and roughly 12% are fully remote.

As more staff work from different states, every hire adds new challenges: state income tax withholding, unemployment insurance (SUTA), local taxes, and obligations around new-hire reporting, benefits, expense reimbursement, data privacy, and more.

Penalties for non-compliance (such as failing to withhold correct taxes, misclassifying employees, or missing state filings) include back taxes, interest, fines, and, in some cases, legal action.

States are also increasing enforcement and passing new laws that expand employer obligations, including higher minimum wages, new paid leave or family/medical leave laws, and expanded worker protections.

This guide provides a clear, step-by-step roadmap for registering payroll in a new U.S. state. You’ll understand exactly how to set up withholding, SUTA, and local tax obligations, and ensure compliance so you can scale without surprises.

What Changes in Your Payroll When You Expand Into a New State?

When your company hires remote employees, relocates staff, or opens operations in a new U.S. state, payroll compliance is no longer about doing the same things you do locally.

State payroll registration brings new registrations, withholding obligations, unemployment insurance, and sometimes local taxes.

What is “State Payroll Registration”?

Think of state payroll registration as the legal, regulatory setup required when your business starts having employment activity in a U.S. state where you don’t already have payroll infrastructure.

Its main components include:

• Withholding Tax Registration: Registering with the state’s Department of Revenue (or equivalent) to withhold state (and sometimes local) income or wage taxes from employees’ paychecks (“state withholding”).
• SUTA: Registering to pay into the state’s unemployment insurance program. This involves setting up an employer account, paying regular contributions, and possibly conforming to experience-rating or new employer rate rules.
• Local / City / County Payroll Taxes: Some municipalities or counties have local income or occupational taxes, “head taxes” or payroll levies, disability or paid family leave, or other employer obligations. Even if you register for state-level withholding and unemployment, local taxes may require separate registration.

Each state has its agencies, rules, and thresholds. So “registration” means: obtaining the appropriate employer tax IDs, unemployment account numbers, withholding accounts; registering with local tax entities when required; and ensuring your payroll system is set up to withhold, remit, report, and file in each jurisdiction.

You don’t always register just because you’re incorporated in a state or sell there; payroll registration is triggered by certain “nexus” events. The main triggers for payroll include:

Sometimes there are thresholds or de minimis rules (e.g., number of days worked, amount of wages paid) for nonresident or remote workers, before some states require you to register or withhold.

For example, some states require withholding only if nonresident employees perform work above a certain number of days or earn above a minimum in that state.

Step 1: Register for a State Withholding Account

State income tax withholding ensures employers collect and remit taxes from employees’ wages to the state revenue agency on a regular schedule. It helps employees avoid a large tax bill at year-end and keeps the state’s revenue stream stable.

For startups expanding into a new U.S. state (remote hires, relocations, or opening a physical location), setting this up correctly avoids penalties, interest, or audit exposure.

How to Determine If the State Requires Registration

Check whether the state levies individual income tax. As of 2025, nine states do not impose a broad state income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.

Also, consider where work is performed, not just where the business is headquartered. If you have employees working in a new state, even remotely, that state may require you to withhold. Reciprocity agreements may apply in some adjacent states.

Step-by-Step Process to Register

Identify the correct state agency

For most states, the Department of Revenue (or Department of Taxation) handles income tax withholding; some states combine withholding and unemployment or payroll taxes in one department.

Apply online or via form

• California: Employers must register with the California Employment Development Department (EDD) for income tax withholding and payroll tax account. Register within 15 days of paying over US$100 in wages in a calendar quarter.
• New York: Employers register with the New York State Department of Labor (NYSDOL) and the Department of Taxation and Finance (DTF). Use Form NYS-100 (or NYS-100N for nonprofits).

Provide required information

You will need your FEIN (Federal Employer Identification Number), legal business name, business address, NAICS code or industry classification, first payroll date, and the names of responsible parties or officers.

Receive your withholding account number

After application, the state will issue a withholding identification or employer withholding account number; this is what you will use on payroll filings.

Step 2: Register for SUTA

State Unemployment Insurance (SUI, or SUTA in many contexts) is a state-mandated payroll tax that employers pay to fund unemployment benefits for workers who lose their jobs through no fault of their own.

Startups and high-growth companies must properly register for it; failure to comply can lead to back taxes, penalties, audits, and reputational risk.

How Employer Rates Are Set

When you first become liable for SUTA in a state, you’re generally assigned a new employer rate (also called “initial rate”). This rate is fixed for a set period (often 1 to 3 years) until you build a track record. After that, you shift into an experience rating system.

Your SUTA rate fluctuates based on your unemployment claims history (how many former employees have drawn benefits), your payroll history, and sometimes your industry.

States use formulas such as the reserve ratio or benefit ratio (benefits charged vs taxable payroll over a period) to determine whether you pay more or less. Employers with lower turnover generally get lower rates.

Step-by-Step Registration Process

Determine liability

Figure out at what point you are required to register in the state. That might be once you hire your first employee, reach a minimum payroll, or have employees physically working in that state.

Identify the agency

The state Department of Labor, State Workforce Agency, or Department of Revenue will usually handle UI/SUTA.

Gather required information

Commonly needed items include your Federal Employer Identification Number (FEIN), legal business name, business address, start date of payroll, industry classification, and names and SSNs of officers or owners.

Submit registration

Many states allow for online registration; others offer paper forms. After registering, you’ll be assigned a SUTA (or UI) account, an employer rate, and instructions on wage base and reporting frequency.

Set up the payroll system with the new rate

Once you have the state rate and wage base, update your payroll system or provider so that SUTA is calculated correctly.

Step 3: Check Local Taxes and City Payroll Requirements

When you set up payroll in a new state, state taxes are only part of the picture. Many cities and municipalities also impose their own payroll-related taxes. Failing to account for these can lead to higher costs, penalties, and unhappy employees.

Here’s what you need to know:

Local Payroll Tax Types: What to Watch

How to Determine If Local Filing Is Required

Map Employee Work and Residence Location

Local taxes often depend on where the employee physically works or resides. For remote workers, this can create dual obligations.

Check State and Local Tax Agency Websites

Every state has a Department of Revenue or equivalent. Also, look up municipal tax offices for cities where you plan to hire. For instance, New York State and New York City require withholding for non-residents working in the city.

Review City Ordinances or Local Tax Codes

Local government websites often publish the tax rates, exemptions, and deadlines. Examples include Detroit’s employer withholding orders and Grand Rapids’ guide for withholders.

Use Tax Lookup Tools and Legal Databases

Some tools allow you to input zip codes and city names to see which local taxes apply. State rate lookup tools, or third-party payroll compliance platforms, are useful for this purpose.

Step 4: Set Up New Hire Reporting in the State

Under the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) of 1996, all employers are required to report new and rehired employees to their state’s New Hire Reporting Program.

Employers do this so the State Directory of New Hires can contribute data to the National Directory of New Hires (NDNH). Each U.S. state (plus D.C.) operates its portal or designated website (and often provides online and non-electronic submission methods).

Although federal law sets a general requirement to report within 20 calendar days of the employee’s first day of work, many states require faster reporting. Some examples include:

• Alabama: 7 days
• Georgia: 10 days
• Massachusetts: 14 days
• Iowa: 15 days

Step-by-Step Setup Process

Step 5: Align Payroll Software and Compliance Systems

When you’ve registered all the relevant withholding, SUTA, and local tax accounts in a new state, the next phase is ensuring your payroll tech stack and compliance systems are tuned correctly.

Update Your Payroll Provider with New State/Local Tax Accounts

Enter all new account numbers and registration details into your payroll provider (software or service). That includes withholding tax IDs, SUTA account numbers, and local tax or municipal tax identifiers.

Payroll tools like QuickBooks warn that you must add state, local rates, and account numbers to enable electronic tax payments and filings. Neglecting to update these causes incorrect withholding, failed filings, and penalties.

Ensure Correct Withholding Tables and Tax Rates Are Applied

Each state has unique withholding schedules (often tiered by income, filing status, and number of allowances) and may have local rates or special levies. Your system must use the current tables for that state (and city/county where applicable).

Regularly verify the tax rate tables, especially before running payroll in that state. Software vendors often release updates when state tax laws change. Using stale tables can lead to under-withholding (underpayment) or over-withholding (employee dissatisfaction and possible refunds).

Test Payroll Runs in the New State Before Going Live

Before you pay real employees, run test payrolls (“dry-runs” or “parallel runs”), including a few sample employees in the new state. Validate gross-to-net, tax deductions (state + local), benefit deductions, and net pay.

IRIS’s guide on payroll parallel testing outlines running old and new system(s) side by side for at least one full pay cycle to spot discrepancies. This helps avoid issues like incorrect tax deposits, missing local taxes, or misapplied benefits.

Sync with HRIS and Accounting Systems

Ensure your Human Resource Information System (HRIS) has accurate employee data; including addresses, work location, and residency status, that drives tax jurisdiction. When someone moves, you must update their record in HRIS and payroll.

Accounting systems should also mirror payroll entries for liability accounts (withholding, tax payable, SUTA) so that month-end closes tie out. Automated integrations reduce double entries and errors.

Tools like Rippling, Gusto, ADP, and others offer integrations that auto-update when employee address or location changes.

Best Practices for Founders and Finance Leaders Managing Multi-State Payroll

Here are the best practices to keep your multi-state payroll compliant, clean, and scalable:

Build a Payroll Compliance Checklist

Start with a master checklist covering every state you operate in (or plan to), including: state withholding registration, SUTA registration, local taxes, new-hire reporting, pay frequency laws, minimum wage and overtime, wage deductions, and paid leave laws. Update it annually (or more often) as laws change.

Assign Clear Internal Ownership

Define who owns what: finance handles tax remittances or general ledger; HR owns work-location tracking, documentation, and new hire filings; an outsourced provider (if used) must have clear accountability for registrations, updates, and filings. With roles spelled out, there’s no blaming “someone else” when deadlines slip.

Centralize Documentation

Collect and store all EINs, state or local tax account IDs, correspondence with agencies, registration confirmation letters, and notices of rate changes. Use a shared secure system (e.g., an HRIS, centralized cloud folder with proper access controls) so finance, HR, and audit teams can find what they need quickly.

Monitor Regulatory Updates in High-Change States

Some states change payroll rules, tax rates, or wage and hour laws frequently (e.g., California, New York, Washington).

Subscribe to official sources (state DOR, Labor departments), use services or tools that send alerts about regulatory changes, or partner with payroll/tax experts who track these.

Automate Where Possible Without Losing Oversight

Automation tools (payroll software, tax engines) can handle calculations, rate changes, submission filing, local tax obligations, and generate alerts. These reduce manual error and scale much better.

Maintain dashboards for key metrics (filing deadlines, tax payment status, audit flags), run periodic internal audits, and keep someone responsible for validating that the automation keeps up with state or local changes.

Simplify Multi-State Payroll Registration with Expert Support

Expanding into a new state brings incredible opportunities, but also comes with several compliance requirements. Each state has its own rules for withholding tax, SUTA, and even local levies.

For founders and finance leaders at Seed to Series B stages, the challenge isn’t just setting up accounts; it’s coordinating deadlines, avoiding penalties, and ensuring payroll systems reflect each state’s latest rules.

This is where outsourced compliance partners like Chore come in. Instead of managing multiple Department of Revenue portals or tracking shifting SUTA rates alone, Chore helps startups centralize the entire payroll registration process.

From obtaining state tax IDs to setting up unemployment insurance accounts and local tax filings, Chore ensures every compliance box is checked, without distracting your internal team from growth.

By maximizing automation and expert oversight, you reduce the risk of missed filings, back taxes, or payroll errors that frustrate employees. More importantly, you maintain investor confidence by showing that compliance and scalability are baked into your operations from the start.

Take the headache out of payroll registration. Partner with Chore today and focus on scaling your business, not struggling with tax forms.

FAQs

Do all states require payroll registration if I hire one remote employee?

Not all states require full payroll registration for one remote employee, but most do. If the state has an income tax, you’ll need a withholding account. Nearly all states also require SUTA registration once you hire there, even without income tax. Some cities add local payroll taxes.

How does payroll registration differ in states without income tax?

In states without income tax (e.g., Texas, Florida, Nevada), employers don’t need to register for state withholding accounts, but they must still register for SUTA (unemployment insurance) and handle new hire reporting, workers’ comp, and labor compliance. Some local jurisdictions may still impose payroll or occupational taxes, so employers should always check city/county requirements.

Can I outsource payroll registration to a provider?

Yes, you can outsource payroll registration to providers like Chore. We handle state/local tax registrations, unemployment accounts, and new-hire reporting, which saves time and reduces errors. However, you’re still legally responsible for compliance. To stay safe, provide accurate info, keep track of account numbers and correspondence, and assign internal oversight.