About reciprocal agreements and local payroll tax districts

Suppose cities A and B have a reciprocal agreement. City A has a local tax of 0.75% and City B has a local tax of 0.5%. Rick lives in city A but works in city B. When Rick is paid, City B receives its 0.5% tax and City A, because of the reciprocal agreement, receives 0.25%, which is the difference between the taxes.

When you set up a locale in the 5-3-6 Local Payroll Tax window, you can indicate that a locale is subject to a reciprocal agreement. In the Differential column, you can indicate that the locale where the project is located has a reciprocal agreement by typing Yes. You can then assign the locale to the job record. When you compute payroll, Sage 100 Contractor compares the non-resident rate of the job’s locale to the resident rate of the employee’s locale. If the rate for the employee’s locale is greater, Sage 100 Contractor calculates the difference and withholds the amount from the employee’s pay.