What Is SUI Tax and How Do I Pay It? - What You Need to Know


If you are a business owner, the struggles can sometimes far outweigh the rewards. During those struggles, you can try as hard as you like to keep your business running as it always has, but there will come a time when that is simply not possible anymore.

During these dark moments, you can no longer think about keeping everything the same, and you have to start making some drastic cutbacks. Maybe, you no longer keep the most expensive item on the menu, or maybe you start reducing trading hours. However, there will come a time when you may need to start laying people off.

This is always a difficult decision. It is heartbreaking to make someone you’ve probably worked with for a while jobless, especially if you have become close, or you know they are an excellent employee. During these moments, though, you can be thankful that at least for a while their situation will be okay thanks to the SUI tax. But what is the SUI tax? And more importantly, how do I as a business owner pay it?

Well, today, we seek to find out more about the SUI tax and what you need to do as a business owner to pay it.

Also read: How to Review Your Paychecks Before Filing Income Taxes

Table Of Contents

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What is the SUI tax?

The SUI tax is a part of the payroll taxes that an employer will pay on the behalf of an employee. This specific tax is called the State Unemployment Insurance Tax, and it goes directly into a payment pot known as the state unemployment fund. This fund covers benefits to the employee if they lose their job.

The tax is deducted from the employer or the employer’s company, and it is not collected separately by the government, but included in payroll itself. This fund applies to all workers – full-time, part-time, contract, and any others – and it is vital to keep people afloat during a difficult period.

Once an employee has lost their position, they are eligible to receive this fund. In order to do so, they must file for unemployment or an unemployment claim, after which a wage replacement is sent from the fund to act as their income for a short period of time, instead of their employment.

However, there are people who are not eligible for unemployment though. In fact, there are two conditions for receiving the SUI fund. These two conditions are: that you lost your job through no fault of your own (i.e. you were laid off to save money) and that you are actively seeking work. If you were fired for incompetence or misconduct, then you cannot claim the SUI.

Also read: A Full Guide on How to Calculate Income Tax On A Pay Check


Who Pays for the SUI Tax?

The SUI tax is charged on your employer’s total payroll and so the employer must pay it, so if you are an employer, pay it. There are only a few exceptions to the employer dealing with this tax and those are three states: Alaska, New Jersey, and Pennsylvania. In these states, the SUI is deducted directly from the employee’s wages themselves.

Excluding employers and employees who live in these three states, every other state requires the employer to pay for the SUI. The tax rates for the SUI vary depending on the state the employee resides in and the income of the employee, but the maximum tax rate for the SUI sits at 20.6% and this is not normally the amount that is taxed.

Also, it should be noted that the employer must pay what the employee is eligible for. For example, if an employee is eligible for a 5% SUI tax rate, then that is what the employer must pay. There are no exceptions to this one.

Also read: Mandatory Deductions From Your Paycheck

Are SUI and SUTA the Same Thing?

Yes, they represent the same thing, the only difference is what they are referring to in that context. So, the SUI refers to the actual tax, with its name being the State Unemployment Insurance tax, whereas SUTA refers to the act that enshrines the tax in law, being the State Unemployment Tax Act.

They basically refer to the exact same tax, but they use different names because of how they think of the tax and how they interact with the tax, whether that be through the insurance that ensures they won’t go hungry if they lose their job or through looking at the act itself.

In other parts of the country, this tax is referred to by different names as well, depending on the lexicon of the people in that area. A couple of examples would be the Unemployment benefit tax or the reemployment tax.

Also read: Are Moving Expenses Tax Deductible?

Who Is Eligible for Unemployment Benefits?

This benefit is for anyone who got let go from their job in a way that they couldn’t stop, was unavoidable, or was not their fault, say if a business went under, or they suffered health problems. This covers the vast majority of people who have lost a job in the past, and it is an unfortunate fact of life that most people will have to use this tax to survive.

However, if you were fired for misconduct or incompetence, or you quit your job, you are not eligible for this benefit. This is because it was a decision completely within your control, or you cost yourself the position you were in.

It is worth noting that some vindictive companies or managers may try to force you out and make it look like your fault, so the fund will not be accessible to you. If you see this coming, make sure you act as professional as possible and don’t give them any reason to blame them firing you on you. That way you can still get your benefit and if they protest you have ground for taking them to court.

If you are a business owner, don’t become these types of companies and don’t employ managers like this. It will just lead to headaches for you later on and may affect your reputation.

Also read: Are Home Improvements Tax Deductible?

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The SUI tax is an incredibly important tax that will help make sure that you are able to survive during a difficult period of your life, or help your employees survive when you have to let them go. It is a legitimate lifeline that will ensure your future and your family’s future is secure while you find a new job, and as a business owner helps make sure you are on good terms with your former employees. If you feel you don’t need to use it or your pride won’t let you, don’t let stubbornness destroy your life.

Use our pay stub generator which allows you to create pay stubs in a simple and easy-to-use manner. 

Frequently Asked Questions

Yes, SUI tax payments are generally tax-deductible as a business expense on your federal income tax return. Consult a tax professional for more information on deducting SUI tax payments.

If you've overpaid SUI tax, you may be eligible for a refund or credit towards future SUI tax obligations. Contact your state's unemployment agency for information on how to request a refund or credit.

SUI tax generally applies to businesses with employees. However, some exceptions may apply, such as for certain non-profit organizations, religious institutions, and self-employed individuals. Check your state's requirements to determine if your business is subject to SUI tax.

To reduce your SUI tax liability, focus on maintaining a low rate of employee turnover and minimizing unemployment claims. Implementing effective hiring and retention strategies, providing employee training, and fostering a positive work environment can help lower your SUI tax rate.

SUI tax rates vary by state and can change annually. Rates are typically determined by factors such as your business's industry, the number of employees, and your company's unemployment claim history. Contact your state's unemployment agency for information on your specific rate.

To pay SUI tax, you'll need to file a quarterly report with your state's unemployment agency, detailing your payroll and employee information. You can typically do this online, by mail, or in-person. Your payment will usually be submitted along with the report.

Failure to pay SUI tax can result in penalties, interest, and even legal action against your business. If you're having difficulty paying, it's essential to contact your state's unemployment agency to discuss potential payment arrangements.

SUI (State Unemployment Insurance) tax is a type of payroll tax paid by employers to fund unemployment benefits for eligible workers who lose their jobs. Each state has its own SUI program and tax rate.

SUI tax is typically paid on a quarterly basis, although some states may have different payment schedules. Check with your state's unemployment agency for specific due dates.

Employers are responsible for paying SUI tax. It is not deducted from employee wages. In some states, employers may also be required to withhold additional funds from employee wages to contribute to the state unemployment fund.

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What Is SUI Tax and How Do I Pay It? - What You Need to Know
Samantha Clark

A Warrington College of Business graduate, Samantha handles all client relations with our top-tier partners. Read More

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