AADVISORY: UNEMPLOYMENT INSURANCE PROGRAM LETTER NO. 34-02
TO: ALL STATES WORKFORCE AGENCIES
FROM : GRACE A. KILBANE
Office of Workforce Security
SUBJECT: Tax Rate Manipulation – State Unemployment Tax (SUTA) Dumping
- 1. “SUTA Dumping” is a term used by the “employee leasing” industry known as PEOs, to avoid high unemployment insurance (UI) tax rates. One type of SUTA Dumping is discussed below:
- a. Affiliated Companies. A leasing company forms a number of additional corporations and obtains an Unemployment ID # for each company. They report wages for a small number of individuals and pay the state UI taxes on each company until it earns the minimum tax rate. Then the majority of the employees are moved to a corporation with a minimum tax rate allowing it to effectively “dump” the higher tax rate earned by the original company and maintain a low UI tax rate.
Fl. law HR 443-131 F.S. has now stopped PEOs from SUTA Dumping. The result is leasing companies are now raising Unemployment Tax fees to their clients to pass on $100,000,000 of new Unemployment Taxes they are now having to pay.