What is 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.
How SUTA is Calculated?
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:
Tax Wage Base
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.
Tax Rate
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!).
Calculation Formula
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.
Total Liability
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.
Frequency
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.
Practical Example
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:
- Employee 1: $15,000
- Employee 2: $8,000
- Employee 3: $6,000
Here’s how you calculate it:
- Employee 1: They earn over $9,000, so you use the wage base: $9,000 × 0.027 = $243.
- Employee 2: They earn $8,000, less than the wage base, so: $8,000 × 0.027 = $216.
- Employee 3: They earn $6,000, so: $6,000 × 0.027 = $162.
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).
Key Notes
- State Differences: Wage bases and rates vary a lot. Texas sticks to $9,000, but Washington’s is $72,800 in 2025, per the Washington Employment Security Department. Check your state’s website for the exact numbers.
- Exemptions: Some groups, like nonprofits or tiny businesses, might not pay SUTA. In Missouri, for example, nonprofits can reimburse the state instead of paying the tax upfront.
- Why It Matters: Paying SUTA on time gets you a FUTA credit (up to 5.4% off the 6% FUTA rate), saving you money. Miss deadlines, and you could face penalties.
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.
SUTA Rates and Ranges by State for 2025
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.
| State | SUTA New Employer Tax Rate | Tax Rate Range (Positive to Negative Balance) |
|---|---|---|
| Alabama | 2.70% | 0.2% – 5.4% |
| Alaska | 2.7% (2.19% employer; 0.51% employee) | 1.0% – 5.4% |
| Arizona | 2.00% | 0.05% – 14.03% |
| Arkansas | 3.10% | 0.20% – 10.1% |
| California | 3.40% | 1.6% – 6.2% |
| Colorado | 1.70% | 0.81% – 12.34% |
| Connecticut | 3.00% | 1.1% – 8.9% |
| Delaware | 1.80% | 0.3% – 5.4% |
| District of Columbia | 2.7% or prior year avg., whichever greater | 2.1% – 7.6% |
| Florida | 2.70% | 0.1% – 5.4% |
| Georgia | 2.64% | 0.04% – 8.1% |
| Hawaii | 4.0% | 0.21% – 5.8% |
| Idaho | 1.0% | 0.281% – 5.4% |
| Illinois | 3.53% | 0.75% – 7.85% |
| Indiana | 2.5% | 0.5% – 7.4% |
| Iowa | 1.00% | 0.0% – 7.0% |
| Kansas | 1.75% | 0% – 6.65% |
| Kentucky | 2.70% | 0.3% – 9.0% |
| Louisiana | Varies (1.21% – 6.2%) | 0.09% – 6.2% |
Notes on the Table
- New Employer Rates: These are what you pay when you first start your business. Some states, like Texas, say it’s 2.7% or the average for your industry (like construction), whichever is higher, per the Texas Workforce Commission. “Varies” means it depends on your business type—check your state’s site for details.
- Tax Rate Range: This shows the lowest to highest rates for established businesses. A low rate (like 0% in Missouri) happens if you have no layoffs, while a high rate (like 15.655% in Massachusetts) comes with lots of claims. Missouri’s Division of Employment Security says rates adjust yearly based on your history.
- Employee Shares: In Alaska, New Jersey, and Pennsylvania, employees pay a bit too. For example, New Jersey’s site (nj.gov) lists a 0.3825% employee rate for 2025, which you withhold from their paychecks.
- Double-Check: These numbers are from your table and match 2025 data where states have released it (e.g., Washington’s $72,800 wage base from esd.wa.gov). Rates can change, so visit your state’s workforce agency—like dew.sc.gov for South Carolina or labor.vermont.gov for Vermont—to confirm.