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Global Work Glossary

Lost in a maze of global employment jargon? Find your way out with our handy collection of work and HR terminology

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Local Income Tax

What is local income tax?

Local income tax is a tax that’s imposed at the local or municipal level to fund government services, infrastructure, and public programs. It exists in countries across the globe, but for the purposes of this definition, we will focus on the United States.

The primary purpose of local income tax in the US is to fund local initiatives that directly benefit residents within a specific area. This can include investments in public schools, maintenance of local roads and utilities, and public safety services such as police and fire departments.

Tax rates will vary from state to state and companies are responsible for understanding and following the regulations in every jurisdiction they operate in. This can get complicated if companies are based in one state but have employees in another as they may have to pay taxes in both locations.

Because failure to comply with local tax regulations can result in legal consequences, to streamline processes, it’s best to use a global HR solution such as Multiplier. This will automatically calculate the local tax due in each state and ensure that this is withheld from employees correctly. Employees will then see this clearly reflected in their automatically generated payslips.

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