When you join a PEO, it files your state unemployment tax for you. What changes from state to state is whose account that tax is filed under. In some states the PEO reports your employees' wages under its own state account, usually at its own tax rate. In others it must report under your company's account, at your rate. A growing number let the PEO choose. People call these "PEO reporting states" and "client reporting states." This guide sorts all 50 states and Washington, D.C., into those groups and links each one to the state law or state agency page behind it.

A PEO, or professional employer organization, is a company that becomes a co-employer of your staff. It runs payroll, files payroll taxes and often provides benefits, while you still run the business. Our guide to co-employment explains the setup.

The short version

  • Every state charges employers an unemployment tax. Your rate usually depends on how many of your former employees have collected unemployment benefits.
  • In about 17 states, the PEO reports your wages under its own account, so its rate usually applies to your payroll. In about 20, it must use your account and your rate.
  • Eight states let the PEO choose. Two use a mix, and four have no reporting rule for PEOs, so a general test of who the employer is decides. At least four states changed their rules in 2025 or 2026.
  • The setup decides whether you keep your own rate while you're with the PEO, and what rate you start at if you leave.
  • Ask any PEO, in writing, which account it will use in each state where you have staff.

What "reporting state" means

State unemployment tax, often called SUTA, pays for the benefits that laid-off workers receive. Every employer has an unemployment tax account with each state where it has staff, with its own account number. Each state sets a rate for each account. A business whose former employees rarely claim benefits usually pays a lower rate than one with many claims. That track record is called your experience rating. Our guide to PEO unemployment insurance covers how the tax and the rates work.

When a PEO runs your payroll, the state still needs to know whose record your employees' wages belong to. Each state's answer puts it in one of five groups:

  • PEO reporting. The PEO reports your employees' wages under its own state account. In most of these states the PEO's rate applies, and that rate reflects the claims of all its clients together.
  • Client reporting. The PEO still does the filing and paying, but under your state account number and at your rate. Your own record keeps building.
  • The PEO chooses. The law lets the PEO pick one method. If it doesn't pick, the law names the method that applies, and some states let it change its choice only once.
  • Mixed. Kansas and Tennessee keep a separate account for each client but charge the PEO's rate.
  • No reporting rule for PEOs. The state uses a general test of who counts as the employer, and that decides whose account is used.

Federal law leaves this choice to each state. A 2004 federal law stopped employers from moving payroll to a new account just to get a lower rate, but the Labor Department told states it did not change whether they treat the PEO or the client as the employer.

Every state, with its source

We read each state's unemployment law, its PEO law or its unemployment agency's guidance in November 2026. The table gives the short answer. "Yours" means your company's account or rate. "Not stated" means the law makes the PEO or you the employer but does not say whose rate applies. State laws often call PEO staff "leased workers." A bond, in this table, is money or insurance the state holds in case the PEO doesn't pay. The exact law or agency page for every state is linked at the end of this article, under Sources, so you can check any row yourself.

Whose unemployment account a PEO reports your wages under, by state (checked November 2026)
StateWhose accountWhose rateWorth knowing
AlabamaPEO'sPEO'sThe PEO reports separately for each client
AlaskaYoursYoursThe PEO may file for you with your written authorization
ArizonaPEO'sPEO'sAfter two or more years with a PEO, you restart as a new employer when you leave
ArkansasYours at firstYours, then the PEO'sA bonded PEO may move you to its account after three years
CaliforniaDecided by a general testFollows the accountThe PEO is the employer only if it does all seven employer tasks on the state's list, such as hiring and paying
ColoradoPEO choosesFollows the choiceYour account if the PEO makes no choice
ConnecticutYoursYoursSet in the state agency's employer guide
DelawareYoursYoursThe law says the PEO is not the employer of leased workers
District of ColumbiaDecided by a general testNot statedThe agency says whoever signs the paycheck reports the wages
FloridaPEO'sPEO'sThe one-time option to use client accounts closed in 2012
GeorgiaPEO's, if the PEO is bondedPEO'sA PEO without a bond must use your account
HawaiiPEO'sNot statedThe PEO is treated as the employer for unemployment law
IdahoPEO chooses, with your agreementFollows the choiceYour account unless you and the PEO jointly ask to move your record to the PEO
IllinoisPEO's, if conditions are metPEO'sIf your rate is high and the PEO's is much lower, the state keeps you on your own account
IndianaPEO choosesFollows the choiceYour account if the PEO made no choice
IowaYoursYoursSet by a state agency rule
KansasA separate account for each clientPEO'sMixed setup
KentuckyPEO choosesFollows the choiceA choice since January 1, 2025. Before that, in 2023 and 2024, the PEO had to use your account
LouisianaYoursYoursYour old rate comes back when you leave
MaineYoursYoursSince January 1, 2026. The PEO's account was used before
MarylandPEO'sPEO'sThe PEO takes over your record when it takes on your workers
MassachusettsYoursYoursSet by state law
MichiganYoursYoursSince January 1, 2014
MinnesotaYoursYoursThe PEO is assigned your account for the length of the contract
MississippiYoursYoursThe law makes you the employer of leased workers
MissouriPEO'sNot statedSeparate reports for each client unless the PEO posts a bond
MontanaPEO'sNot stated in the lawSeparate wage lists for each client
NebraskaYoursYoursSet by state law
NevadaYoursYoursThe law makes you the employer of leased workers
New HampshirePEO'sPEO'sSet by a state agency rule
New JerseyPEO choosesFollows the choiceThe PEO's account if it makes no choice
New MexicoPEO'sNot statedA general rule for leasing companies
New YorkPEO'sPEO'sSet by state law
North CarolinaPEO'sNot statedA licensed PEO is the employer under the unemployment law
North DakotaYoursYoursThe PEO's rate only with the state's approval
OhioPEO choosesFollows the choiceYour account unless the PEO picks its own, an option since September 17, 2026
OklahomaPEO choosesFollows the choiceThe PEO's account if it makes no choice
OregonPEO choosesFollows the choiceSince September 26, 2025
PennsylvaniaYoursYoursSet in the state agency's guidance
Rhode IslandYoursYoursYou and the PEO are both responsible for the tax
South CarolinaYoursYoursThe state agency says your account. A separate PEO licensing law calls the PEO the employer
South DakotaYoursYoursSet in the state agency's forms
TennesseeYour account numberPEO'sMixed setup: the PEO's rate pools all its clients
TexasPEO'sPEO'sYou restart as a new employer when you leave
UtahPEO'sPEO'sSet by state law
VermontYoursYoursSet by state law
VirginiaDecided by a general testNot statedThe unemployment law does not mention PEOs
WashingtonYoursYoursSet by state law
West VirginiaDecided by a general testNot statedThe PEO contract must say who files
WisconsinPEO'sPEO'sIf all your staff are leased, your own account stays open for five years
WyomingPEO'sNot statedSeparate reports for each client

"Separate reports for each client" means the PEO files one report per client, but under the PEO's account. In our counts, Arkansas and South Carolina sit with client reporting, and Georgia and Illinois with PEO reporting. Rules change, so check the linked source, or ask the state, before you rely on a row. This table is a guide, not legal advice.

Why the lists online disagree

Several payroll and PEO companies publish their own lists of reporting states. We compared three that show up in search, and they disagree with each other on at least six states: Idaho, Louisiana, Maine, Missouri, Wisconsin and Wyoming. There are two reasons.

  • They describe what that company does, not what the law requires. In a state where the PEO chooses, one PEO may use its own account and another may use yours. Both are following the law.
  • The rules move. Maine switched to client reporting on January 1, 2026. Kentucky required client reporting in 2023 and 2024, then let PEOs choose from 2025. Oregon's choice took effect in September 2025, and Ohio added one in September 2026.

So treat any list, including ours, as a starting point. The PEO you're talking to should be able to tell you which method it uses in each of your states.

What changes when you join

In a client reporting state, little changes. Your state account stays open, your rate keeps following your own record, and the PEO files under your account number.

In a PEO reporting state, your employees' wages move onto the PEO's account. Two things follow.

  • Your rate becomes the PEO's rate. That rate can be higher or lower than your own. If your company has had many claims, the PEO's pooled rate may be lower than yours. If it has had few, the PEO's may be higher.
  • Your own claims history may stop counting toward your rate, or may move to the PEO. In Maryland, the PEO takes over your record when it takes on your workers. Idaho allows PEO reporting only if you and the PEO jointly ask the state to move your full record to the PEO. Indiana's agency warns that joining a PEO that reports under its own account "can cause an employer to lose a great amount of their experience balance."

Example with made-up numbers, to show how it works: say your own rate is 1.5% and you join a PEO in a PEO reporting state where the PEO's rate is 2.5%. Each state taxes only the first part of each worker's pay in a year, up to a limit the state sets. While you're with that PEO, that part of your employees' pay is taxed at 2.5%, even if none of your former employees files a claim. If the PEO's rate were 1%, the effect would run the other way. Ask for the PEO's current rate in each of your states before you sign.

Joining partway through the year can also affect how much of each employee's pay is taxed that year. Our guide to wage base restarts walks through it.

What happens when you leave

This is where the setup matters most, and states handle it in very different ways.

  • Louisiana (client reporting). Your old account is reopened "under its previously existing experience rating."
  • Arizona (PEO reporting). If you were with the PEO for at least two years, you're treated as "a new employer without a previous experience record."
  • Texas (PEO reporting). When the contract ends, you're treated as a new employer unless you already have a rate history of your own in Texas.
  • Indiana (the PEO chooses). If you leave a PEO that reports under its own account, and you keep paying staff in Indiana, you leave with part of the PEO's claims history. For that year, you pay the PEO's rate.
  • Wisconsin (PEO reporting). If all your staff were leased, the state keeps your own account open for five years, and you return to it if the agreement ends.

A state's new-employer rate is set by law and can be higher or lower than the rate you had. Our guide to leaving a PEO covers the rest of the exit.

Who owes the tax if the PEO doesn't pay?

You may. In several states, the law makes you and the PEO jointly responsible for unpaid unemployment tax. Rhode Island and Louisiana are two examples. Missouri and Wyoming make the client responsible in some cases too. This is one reason to check that a PEO is licensed or registered where your staff work. Our guide to PEO licensing by state shows how.

Does a certified PEO change any of this?

No. IRS certification, which makes a PEO a "CPEO," changes who is responsible for federal payroll taxes, including the federal unemployment tax. The law behind it covers federal taxes only. Whose state account your wages go under is still set by each state. Our guide to certified and non-certified PEOs explains what certification does change.

If your staff work in more than one state

Each state applies its own rule to the employees who work there. A company with staff in Texas and Pennsylvania, for example, would be under the PEO's account in Texas and its own account in Pennsylvania at the same time. Our guide to multi-state PEOs covers the other state-by-state differences.

Questions to ask a PEO

  • In each state where we have employees, will you report our wages under your account or ours?
  • If under yours, what is your current rate in that state, and how often does it change?
  • What happens to our own state account while we're with you? Does it stay open, close or move to you?
  • If we leave, what rate do we start at in each state?
  • Where the state lets you choose, which method do you use, and can you change it while we're a client?
  • Who answers the state when a former employee files an unemployment claim?

The bottom line

Whose account your wages go under is set state by state, not by federal law. In client reporting states your own rate and record carry on. In PEO reporting states you take on the PEO's rate, and leaving can mean starting over. Neither is better in every case; it depends on your own record, the PEO's rate in your states and how long you plan to stay.

If you'd like help sorting this out for the states where you have staff, request a consultation and we will connect you with our independent broker. The consultation is free to you. If you sign through the broker, he shares part of his fee with us. Because the broker looks at the rules in each of your states, expect the consultation to take several business days.

Sources

State laws and agency pages