Tax Reciprocity rules tell payroll what to do when an employee lives in one jurisdiction and works in another. Many states have agreements with their neighbors: instead of withholding income tax for both states, the resident state gives credit for tax paid to the work state — or the employee is exempt from the work state's tax entirely. This page is where you record those agreements so multi-state withholding comes out right on every paycheck.
Each row is one rule between a resident jurisdiction and a work jurisdiction, with a credit type that says how the two offset.
Where to find Tax Reciprocity
From the left sidebar choose HR & Payroll, then Tax Reciprocity — it sits right below Tax Jurisdictions.
The reciprocity grid
| Column | What it shows |
|---|---|
| Resident Jurisdiction | Where the employee lives. Searchable dropdown of your tax jurisdictions. |
| Work Jurisdiction | Where the work is performed. |
| Credit Type | How the resident jurisdiction treats tax paid to the work jurisdiction — see the table below. |
| Credit % | The share of work-state tax credited. Only editable for Partial Credit rules — Full Credit pins it to 100%, No Credit and Exempt pin it to 0%. |
| Max Credit Rate % | An optional cap on the credited rate. Applies only when a credit is granted (Full or Partial); blank shows as No cap. |
| Agreement | The name of the reciprocity agreement, for reference. |
| Effective / End Date | When the rule applies. An empty end date shows as (current). |
| Notes | Free-text notes. |
Credit types
| Credit type | What it means |
|---|---|
| Full Credit | The resident jurisdiction credits 100% of the tax paid to the work jurisdiction (optionally capped by Max Credit Rate %). |
| Partial Credit | Only a portion is credited — set the percentage in the Credit % column. New partial rules start at 50% for you to adjust. |
| No Credit | No offset — both jurisdictions' taxes are withheld in full. |
| Exempt | A formal reciprocity agreement exempts the employee from the work jurisdiction's tax; only the resident jurisdiction withholds. |
Adding and editing rules
Right-click the grid to add a rule. A new row appears — pick the resident and work jurisdictions, choose the credit type, and fill in the remaining cells. Save with the checkmark or Enter; cancel with Escape. Existing rules edit inline: click a cell and type.
The grid keeps the percentage columns consistent with the credit type: switching a rule to Full Credit sets the credit to 100%, switching to No Credit or Exempt sets it to 0%, and only Partial Credit leaves the percentage up to you.
How reciprocity connects to payroll
- When a payroll run withholds taxes for an employee whose resident and work jurisdictions differ, include GO looks for a reciprocity rule covering that pair and applies the credit it describes.
- The jurisdictions themselves — and their rates — live on the Tax Jurisdictions page. Reciprocity only decides how two jurisdictions' withholdings interact.
Permissions
Viewing requires HR view access; adding, editing, and deleting rules require the settings manage/update permission. Read-only users can still copy grid data.
Tips & best practices
- Record the agreement name. State reciprocity agreements have official names — putting them in the Agreement column makes audits painless.
- Use effective dates. Agreements change; end-date the old rule and add a new one rather than editing history.
- Only pairs you actually have. Add rules for the state pairs where your employees really live and work — a shorter list is easier to keep right.
Common questions
Do I need this if all my employees live and work in one state? No. Reciprocity only matters when someone's resident and work jurisdictions differ.
Why can't I edit the Credit % on a rule? Its credit type isn't Partial Credit. Full Credit is always 100%, and No Credit / Exempt are always 0% — switch the type to Partial Credit to choose a percentage.
What's the difference between Exempt and Full Credit? With Exempt, the work jurisdiction's tax is never withheld at all. With Full Credit, it is withheld but the resident jurisdiction credits it back in full.
Related topics
- Tax Jurisdictions — the authorities and rates these rules connect.
- Payroll — where reciprocity credits are applied to withholdings.