Understanding Reciprocal Agreements

Some states have local city taxes that are based on where the company office is located, where the job site is located and where the employee lives.  If an employee works on a jobsite that is NOT located in the same city where the company office is located or in the same city where the employee lives, then the employee's wages may be fully subject to all of the local taxes.  If the cities have reciprocal agreements, then the employee's wages are still subject to the local taxes, however, the amount paid to one entity is also credited to the other entity.  Keep in mind that when searching for the local taxes during timecard entry, AccuBuild will first search the job file, then the employee file and then the company file for the local tax codes.

Example:

MJS Construction is located in Akron, Ohio and has a job site in Beechwood, Ohio.  The local tax for Beechwood is 1.5% and the local tax for Akron is 2%.  A separate local tax code must be set up for each city.  The Beechwood local tax code is linked to the job and the Akron local tax code is linked to the company's payroll properties.  If the two cities did not have a 100% reciprocal agreement, and the employee worked at the jobsite in Beechwood, then the employee's wages would be subject to a total of 3.5% local tax.  However, Akron and Beechwood do have a 100% reciprocal agreement which means that the employee's wages are only subject to a total of 2% in local taxes.  Following the local tax search sequence, AccuBuild will calculate 1.5% for the Beechwood city tax (job file first) and then calculate the 2% Akron city tax. But due to the reciprocal agreement, AccuBuild will credit the job tax to the Akron city tax leaving only .5% for the Akron tax.  

Important Reminder:  If your job site is located in the same city that your company office is located, then DO NOT link the same city tax in the job file, otherwise the tax will be calculated twice.

Note:  Some states, such as California, have an Employee Training Tax that is related to the State Unemployment Insurance tax.  Therefore, the ETT component will accrue in the same manner as the SUI if the SUI Reciprocal Agreement is enabled.