Everything eCommerce Business Owners Need to Know About SUI Withholding

by TaxJar November 1, 2020

This guest post is brought to you by our friends at MyCorporation

“What does the term ‘SUI withholding’ mean, and why does it matter to me?”

If you’re fairly new to entrepreneurship, we’ve got you covered on the ins and outs of SUI withholding and how it’s relevant for small business owners, especially those that run eCommerce businesses.

What does SUI stand for and how does it work?

SUI stands for “state unemployment insurance” which is a program that protects workers who suddenly become involuntarily unemployed. As determined under state law, this type of unemployment is due to no fault of the worker and may include those who left due to health problems, being laid off, or being fired. While the worker looks for a new job in the meantime, SUI provides short-term benefits through the tax.

How do I know if I need it?

Does your eCommerce business have employees or are you planning to hire? If so, you’re required to pay unemployment taxes on their wages in the state. In fact, just about every profitable business must register to pay unemployment insurance with the general rule being that once you pay more than $300 in wages to an employee, you must pay for your state’s unemployment insurance.

What about those self-employed with eCommerce businesses? While you don’t need to buy yourself unemployment insurance, some entrepreneurs like having that kind of safety net provided from the state. If you want to purchase unemployment insurance, form either an LLC or Corporation as your business entity and pay yourself as an employee of the business. Be sure to check with the state you and your business are in before proceeding forward to see what their laws are like concerning this program.

What makes SUI withholding so important to small businesses?

Every quarter, employers are required to submit tax reports even if there were no paid employees during that quarter. For businesses that frequently have unemployment claims filed and associated with their business, their tax rate increases. Furthermore, if you decide to bring unemployment administration in-house, at the bare minimum you will be required to maintain current paperwork and respond to claims on time. If you don’t, your business could be facing some seriously expensive penalties.

Anything else I should know about unemployment insurance or rates?

For unemployment insurance, keep in mind that there’s typically a state maximum wage up to which you pay unemployment insurance. You’ll only need to pay up to that mark. While you’ll still need to report the full amount the employee made, you don’t need to pay any excess wages that go above that ceiling. Also, insurance rates typically change on a yearly basis so make sure you stay on top of those changes. If you need help calculating your rates, check in with the state to see what their process is like as many states do differ on this format.

Deborah Sweeney is the CEO of MyCorporation.com. MyCorporation is a leader in online legal filing services for entrepreneurs and businesses, providing start-up bundles that include corporation and LLC formation, registered agent, DBA, and trademark & copyright filing services. MyCorporation does all the work, making the business formation and maintenance quick and painless, so business owners can focus on what they do best. Follow her on Google+ and on Twitter @mycorporation.Please note: This blog is for informational purposes only. Be advised that sales tax rules and laws are subject to change at any time. For specific sales tax advice regarding your business, contact a tax advisor.

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