How a state unemployment tax works
SUTA is shorthand, not a law's name. It means the contributions you pay into your state's unemployment insurance fund, which pays benefits to people who lose work. Every state has one, and each publishes its own taxable wage base and rate schedule.
Your rate depends on your history. A new employer gets a standard rate for its first years. After that, most states use experience rating: an employer whose former staff drew more benefits pays a higher rate. California, for example, assigns new employers 3.4% for two to three years and uses a schedule running from 1.5% to 6.2%, according to the EDD's 2026 rates page.
SUTA also matters federally. Publication 15 (2026) gives a credit of up to 5.4% against the 6.0% FUTA rate for state contributions paid in full and on time. Pay the state late and you can lose part of that credit.
A California new employer's bill
Say you open in California in 2026 and hire one person at $40,000 a year. The EDD taxes the first $7,000 of each employee's pay each calendar year.
| Tax | Rate | Wage base | Cost |
|---|---|---|---|
| Unemployment Insurance (UI) | 3.4% | $7,000 | $238.00 |
| Employment Training Tax (ETT) | 0.1% | $7,000 | $7.00 |
| Total employer cost | $245.00 |
The whole amount is reached once the employee has earned $7,000, which at $40,000 a year happens in the third month. After that, no more UI or ETT is due for that person until January.
SUTA and the employee's pay stub
In California both UI and ETT are employer costs, so neither belongs in the deductions on a California pay stub. What does appear is SDI, State Disability Insurance, which is withheld from the employee at 1.3% of all wages in 2026. People often mix the two up because the EDD collects both.
Rules differ from state to state, so read your own state agency's rate notice before you set up payroll. Whatever the state, the stub should only list amounts actually taken from the employee's pay.
Read next
- Form 940 and the FUTA credit
- Employer payroll taxes, added up
- How to calculate payroll taxes
- Pay stub generator
Related terms
Questions
What is the difference between SUTA and FUTA?
SUTA goes to your state's unemployment fund and its rate and wage base vary by state and by employer. FUTA is the federal tax: 6.0% on $7,000, reduced to 0.6% when your SUTA is paid in full and on time.
Why did my SUTA rate change this year?
Most states recalculate rates each year from your account's history: the contributions you paid and the benefits charged to your account. A new employer's standard rate also ends after the period the state sets, which in California is two to three years.
Do I pay SUTA on a household employee?
Often yes, but each state sets its own coverage test for household work. Check your state workforce agency's employer pages. The federal FUTA test for household employers is cash wages of $1,000 or more in a calendar quarter.
Sources
- California EDD: Rates and withholding (2026) (read October 8, 2026)
- IRS: Publication 15 (2026), Employer's Tax Guide (read October 8, 2026)
- IRS: Instructions for Form 940 (2025) (read October 8, 2026)
Figures are for the 2026 tax year unless the text says otherwise. This page explains a payroll term; it is general information, not tax or legal advice.