State Payroll Tax Rates and Helpful Tips You Need to Know for 2023
In this busy time it’s crucial for production accounting teams to be aware of any recent legislative changes that impact how payroll tax will be calculated in 2023. Here’s a state-by-state look at all the payroll tax changes you can expect to see this year, and some handy reminders that will help as you set up your production.
States with no announced payroll tax changes in 2023
Before we jump into the states who have enacted changes, let's review the twenty-six states that have not implemented any payroll tax changes for 2023.
Those states include: Alabama, Alaska, Arizona, Arkansas, Delaware, Florida, Idaho, Iowa, Kansas, Kentucky, Maine, Maryland, Michigan, Minnesota, Missouri, Nebraska, New Hampshire, New Jersey, North Dakota, Oklahoma, Tennessee, Utah, Vermont, Virginia, Wisconsin, and Wyoming.
Please note: While states listed above may yet implement payroll tax legislation later in the year, each one is still impacted by federal payroll tax changes. Details on what changes to expect at a federal level can be found in this post.
State-by-state payroll tax changes (and some good reminders) for budgeting in 2023
Now let's take a look at which state taxes changed, and which taxes you should be aware of if your production is setting up:
- First, it’s worth noting that California did not pay back all its federal borrowing for unemployment funds, so the state will be charged extra federal unemployment funds in 2023. Employers will have to pay an additional 0.6%, making the effective FUI tax 1.2% in 2023. This is a federal change, but it will impact your budgeting.
- While the state unemployment insurance (SUI) wage base remains $7,000, and the rate remains at 6.2%, employees will pay less state disability insurance (SDI) in 2023. The rate has been reduced from 1.1% to 0.9%.
- Some municipality-based local taxes are also changing; verify current rates before you build your budget. For example, in San Francisco (city and county), you’ll incur a gross receipts tax of 0.84%, which applies to your gross invoice. Use payroll code (CA-__-SF).
Additional payroll codes to note when recording accrual for sick leave and paid time off (PTO):
- In West Hollywood, use code (CA-__-WH)
- In Santa Monica, use (CA-__-SM)
- In Los Angeles, use location code (CA-__-LA)
Not changes, but reminders:
- Loan-outs that are not registered with the California Secretary of State will be taxed at 7%.
- The California production tax incentive does not require loan-out withholding. When applicable, withholding tax is an income requirement, not an incentive requirement.
- In Aurora and Denver, employers and employees pay an Occupational Privilege Tax, also known as an OPT or Head Tax. In Aurora, productions pay $2 per month per employee and in Denver, it’s $4 a month for each employee.
- A new Paid Family Leave (PFL) tax will be charged to employees at 0.45% of wages. When budgeting, include an employer match of 0.45% of wages, with a max contribution of $720.90 annually for both the employee and employer.
- Also new, Colorado loan-out withholding rates have dropped to 4.4% in 2023, down from 4.55% in 2022.
- While Colorado has a withholding tax requirement, it’s an incentive tax requirement, not an income tax requirement.
- Connecticut didn’t pay back all its federal borrowing for unemployment funds, so the state will be charged extra federal unemployment funds in 2023, which we’re calling FUI2. Standard FUI is 0.6% of the $7,000 wage base. Employers will have to pay an additional 0.6%, making the effective FUI tax 1.2% in 2023. This is a federal change, but it will impact your budgeting.
- Connecticut also has a 0.5% Paid Family Leave (PFL) tax, which applies to resident wages up to the new $160,200 wage base.
- A note on sales tax: EP’s handling fees (HFs) – both standard and casting – are subject to Connecticut’s 6.35% state sales tax.
A few good reminders for productions heading to Georgia:
- Georgia imposes local tax in the city of Atlanta. It’s considered an occupational tax on gross billings, including employee fringes. Eligible costs are subject to a gross receipts tax rate (GRT) of .0014%.
- The 2023 Georgia state unemployment insurance (SUI) wage base is $9,500, and the tax rate remains 8.10%.
- EP payroll handling fees (HFs) are not currently eligible for the Georgia film incentive. However, Central Casting handling fees (Casting HFs) for casting-only services do qualify.
- Hawaii doesn’t have traditional state tax. Rather, they have what’s known as a general excise tax (GET), which is not an income tax. EP’s handling fees are subject to Hawaii’s excise tax at a rate of 4.5%.
- Non-union crew are subject to mandatory health insurance after four weeks of employment. Email HMSA@ep.com for more information.
- New this year, Hawaii has imposed a general excise tax withholding for incentives. Hawaii now requires loan-outs to register for general excise tax (GET), and also expects loan-outs to file a G45 form each year.
- Illinois, too, neglected to pay back all its federal unemployment insurance borrowing (FUI) and now owes higher FUI tax in 2023. In addition to the base rate of 0.6% on a $7,000 wage base, Illinois owes an additional 0.6% of $7,000 in 2023, bringing the effective FUI tax rate to 1.2% for Illinois residents. Again, this is a federal change, but it will impact your budgeting.
- On the incentive side, Illinois had some significant incentive changes this year. Now, non-residents and a certain level of above-the-line (ATL) are allowed to qualify, including actors. The compensation cap was also increased from $100,000 to $500,000.
- A reminder for loan-outs: Illinois does not collect withholdings for loan-outs. However, there is a withholding requirement at the loan-out level. If a loan-out makes an employment payment to an employee-owner, it’s taxed at a rate of 4.95%.
- Productions filming in Louisiana must get an L4 (the state equivalent of a federal W4) for each individual working in Louisiana to qualify for a production incentive. If the L4 is not on file, withholdings will default to the highest tax rate.
- While the 2023 Massachusetts state unemployment insurance (SUI) wage base remains at $15,000, the rate has increased to 19.572%, up from 15.935 % in 2022.
- Massachusetts also has some unique employer taxes. First is the employer medical assistance contribution (EMAC) tax, which is an employer-only tax that must be paid by employers with six or more employees. The tax rate is 0.34% on $15,000 of wages. Massachusetts also collects a Paid Mamily and Medical Leave (PFML) tax, which is 0.312% on $160,200 of wages.
- Lastly, remember that Massachusetts has loan-out withholding (5%) and requires a certification of compliance. We can only issue these certificates after the quarter closes, at the end of the month following the end of the quarter. If you need a certificate, call or email EP tax support to put in a request. Please be sure to provide your EP client ID and the time frame of the certification requested (which quarters). You may receive separate certificates for above-the-line talent, union below-the-line talent, and non-union below-the-line talent.
- Mississippi imposes a 5% loan-out withholding.
- The Montana loan-out withholding rate is 6.9%, and productions must set up an account for loan-out withholding. To do so, tax support at EP will need your Montana certification number and your Montana Department of Revenue account number. You must also tell your paymaster to forward a list of loan-outs to tax support to set up your taxation. Please ensure that all production loan-outs are called out so we can enable taxation.
- Nevada imposes an employer-paid modified business tax. Budget 1.378% of gross wages to cover that tax.
- There is no loan-out withholding in Nevada.
- New Jersey’s loan-out withholding rate is 6.37%, and loan-outs must register with the Secretary of State.
- EP’s handling fees do not qualify for the New Jersey film incentive program, nor does workers comp insurance.
- Productions pay a personal assessment of $2.30 per resident employee, per quarter, to help administer worker’s comp.
- There’s a new gross receipts tax for super loan-out (SLO) clients. Gross billings, including employee fringes, are subject to a gross receipts tax (GRT) from where SLO services are performed. Rates can range between 5.500% - 9.4375%.
- For non-SLO clients, EP’s handling fees are subject to a GRT rate of 7.875%.
- All New Mexico incentive production loan-outs must register with the Secretary of State and the New Mexico Tax and Revenue Department.
- Direct hires (non-resident performing artists paid as individuals) require the maximum personal income tax withholding, which requires a manual calculation. We recommend batching those together and making sure employee edits are reviewed.
- New York, like California, neglected to pay back all its federal unemployment insurance borrowing (FUI) and now owes a higher FUI tax in 2023. In addition to the base rate of 0.6% on a $7,000 wage base, New York owes an additional 0.6% of $7000 in 2023, bringing the effective FUI tax rate to 1.2% for New York residents. This is a federal change, but it will impact your budgeting.
- New York’s state unemployment insurance (SUI) wage has also increased to $12,300 (up from $12,000 in 2022), but the rate remains at 10.13%. That rate includes the interest assessment on the funds New York borrowed in 2020 and hasn’t paid back.
- Also, please note, New York imposes a metropolitan commuter transportation mobility tax (MCTMT) tax rate is 0.34% of gross wages.
- North Carolina requires a 4% withholding on all payments to loan-out companies for the performance of services in North Carolina to qualify for the North Carolina film credit. This withholding requirement applies whether the loan-out is registered with the North Carolina Secretary of State or not.
- Productions are not required to register for a withholding account. Instead, withholdings are reported under the payroll company (EP) account, and we’ll issue a Form 1099-NEC to all loan-outs with the amount paid in North Carolina and the withholding amount.
- Our system applies a 4% withholding by default when a loan-out works in North Carolina. If your production is not using the North Carolina film incentive, loan-outs can register with the North Carolina Secretary of State and can provide EP with the registration information to avoid having that 4% withheld. If you’re interested in this option, contact our team to verify eligibility.
- Ohio imposes a commercial activity tax (CAT) for ‘the privilege of doing business in Ohio.’ The tax rate is 0.26% of gross billings, including employee fringes.
- Oregon has an employer-funded statewide transit tax, which is charged at a rate of 0.1% of employee wages. The state also has a Portland tri-met transit tax, which is charged at a rate of 0.007937%. In Eugene and Lane counties, the transit tax rate is 0.0077%.
- Oregon imposes an employer workers benefit funds assessment, which is 1.1 cents per hour. The assessment is matched by the employee; this fund provides benefits to workers who are permanently disabled.
- If you are heading to the city of Pittsburgh, be aware that there is an employer-funded payroll expense tax (PET), which is calculated as 0.55% of gross wages.
- Loan-out companies must register with the South Carolina Department of Revenue and be issued a withholding number for the individual they’re employing to qualify for the state’s film incentive program.
- The company must also either complete a form I-312, which serves as documentation to submit the registration number to both the production and the payroll processor (EP).
- Alternatively, the company can opt to be subject to 2% withholding on the contract price on a week-to-week basis for any work dates that occur in South Carolina.
- The South Dakota state sales tax rate of 6.5% applies to gross billings, including employee fringes.
- EP handling fees are subject to a 6.6% sales tax rate in Texas.
- Washington state has instituted a new Paid Family Leave (PFL) tax. The employer share is 0.21792%, up to the new social security wage base of $160,200.
- As a reminder, the city of Seattle has a payroll expense tax, but at this time, EP does not qualify for it, so we’re not charging clients. However, we do track activity within the Seattle jurisdiction. If you have employees in Seattle, please code their location as WA-SE-US.
- Washington D.C. has imposed a new paid sick leave employer tax of 0.26% on all resident wages.
- EP’s handling fees in West Virginia are subject to a sales tax rate of 6.0%.
- Also worth noting, West Virginia has re-instated its incentive program.
- Finally, The Virgin Islands still owes the federal government money borrowed for unemployment claims from the great recession, and they’ve been adding on 0.3% for many years. As a result, FUI2 will be 3.9% for Virgin Island-based employees in 2023. This is a federal tax, but it will impact your budgeting.
How EP can help
The one thing you can predict about state tax changes is that you can’t predict state tax changes! But there are proactive ways to make sure you’re using the most accurate and up-do-date info when you build your budget. You can always contact our team of experts at firstname.lastname@example.org to verify the latest rates. Also, be sure to bookmark EP’s incentive tools and sign up to receive our monthly production incentive newsletter to stay up-to-date on incentive changes.
This blog contains general information we are providing on a subject that may be of interest to you. Nothing in this blog should be considered tax advice. You should consult with your tax or legal advisors regarding the applicability of any of these rules to your specific circumstances and how best to handle them.