All states require state income tax withholding, with the exceptions of Alaska, Connecticut, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. Those states requiring a business to withhold state income taxes from its employees all have different methods and forms for doing so, which requires a detailed knowledge of the withholding and remittance requirements of each state. If an organization calculates its own payroll, then it will likely be sent this information on a regular basis through the mail by each state government with which it has registered. For most states, this information is also accessible via their official web sites. A much easier approach, however, is to outsource the payroll processing function, which makes the payroll supplier responsible for making the correct withholdings and remittances (if the employer chooses this service).

If an employer has nonresident employees, and the state in which it does business has an income tax, the employer will usually withhold income for each employee's state of residence. Alternatively, an employer can withhold income on behalf of the state in which it does business and let the employee claim a credit on his or her state tax return to avoid double taxation. The ability to do this will vary by individual state law.