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Home » SUTA
The State Unemployment Tax Act (SUTA) is sometimes referred to as the State Unemployment Insurance (SUI) or reemployment tax. SUTA is a payroll tax levied on employers to assist employees in times of idle through no fault of their own, such as in layoff situations. One can visualize it as a net under the worker when he is laid off: with the help of SUTA funds, a person can survive on very little cash temporarily while searching for a job. Unlike FUTA, which funds an unemployment system that operates nationwide, SUTA is just state-specific; that is, the money goes directly into a state’s own unemployment fund to pay benefits to people in that state. Every state runs its own SUTA program, so the rules, rates, and amounts can differ depending on where your business is. Typically, this tax would apply only to employers, but in Alaska, New Jersey, and Pennsylvania, a small portion is contributed by employees as well. To start with, an employer registers with their state workforce agency (like the Texas Workforce Commission or Missouri Department of Labor), and on-time payment of SUTA would give the employer an additional discount on their FUTA taxes.
After understanding these two facts, SUTA becomes an easy calculation: yes, it is based on the wages your employees earned in a year, but only up to a prescribed amount as determined by your state. This is how it works, in more detail, step-by-step:
Each state specifies a maximum amount of an employee’s annual wages on which you must pay SUTA taxes. It is called the taxable wage base: if an employee earns beyond the amount set, that amount is not taxed for SUTA. Thus, Texas puts it at $9,000, while Washington jumps way up to $72,800 in 2025. This number may change from year to year, and it is ideal to search the latest rules from your state.
Your state provides a tax rate to you, which is a percentage determined by a couple of things. As a new employer, you enter the arena with a “new employer rate” between 1% and 4% (though higher in industries such as construction that suffer more layoffs). For example, Missouri gives new employers 2.51%, but in Ohio, new construction businesses pay 5.6% while others pay 2.7%. After about one or two (sometimes three) years, your rate switches to an “experience rate”. This means how many of your past employees availed of unemployment benefits. Less claims is a better rate, more claims is a higher rate. Some states offer as low as 0% while some charges as high as 15.655%(looking at you, Massachusetts!).
To figure out the SUTA tax for each employee, multiply your tax rate by their wages, but only up to the wage base. Here’s the simple formula:
SUTA Tax = Tax Rate × Taxable Wages
If an employee earns more than the wage base, you only use the wage base amount.
If they earn less, you use their actual wages.
For example:
Wage base is $9,000, tax rate is 2.7%, and an employee earns $12,000. You’d calculate: $9,000 × 0.027 = $243.
Same rate, but the employee earns $5,000. Then it’s: $5,000 × 0.027 = $135.
Add up the SUTA tax for all your employees to get your total. Most states ask you to pay every three months (quarterly), like by April 30 for January to March. In states like Alaska, you’ll also withhold a small employee share (e.g., 0.51%) and send that in too.
You usually file a report and pay SUTA four times a year. Some states, like Vermont, let small businesses pay once a year if they don’t owe much. This tax only applies to regular W-2 employees, not freelancers or contractors.
Let’s say you run a small business in Texas, where the 2025 wage base is $9,000, and your new employer rate is 2.7%. You have three employees with these yearly salaries:
Here’s how you calculate it:
Add them up: $243 + $216 + $162 = $621 for the year. Since Texas requires quarterly payments, you’d pay about $155.25 each quarter ($621 ÷ 4).
For the most accurate info, visit your state’s official site—like labor.mo.gov for Missouri or twc.texas.gov for Texas—or use payroll software that keeps up with the rules.
Here’s a table showing the new employer tax rates and the range of rates for established employers (from low claims to high claims) for 2025, based on your data and official state insights where available.