Hiring your first employee in District of Columbia

What do you have to register for before your first payroll?

The District has two payroll registrations, not one, and a licence on top of both. The FR-500 Combined Registration Application, filed free on MyTax.DC.gov, opens all your Office of Tax and Revenue accounts at once: withholding, sales and use tax, corporate or unincorporated business franchise tax and the ballpark fee. It does not touch the Department of Employment Services. Unemployment insurance is a separate registration at essp.does.dc.gov, and that one account covers both unemployment insurance and Paid Family Leave, which share a single account number and a single quarterly wage report. Workers compensation is not a District account at all, it is a policy you buy from a private insurer. The step out-of-town employers miss is the third one: the Department of Licensing and Consumer Protection wants both a foreign registration for your entity and a Basic Business License, and the licence has prerequisites that take time. DLCP lists five: a federal employer identification number, tax registration with the Office of Tax and Revenue, a Certificate of Occupancy for a commercial address or a Home Occupation Permit if you work from home, a Certificate of Clean Hands showing you do not owe the District more than $1,000, and corporate registration in good standing with a registered agent. A General Business License is $99 for two years, $49 for six months or $198 for four years, applied for at boss.dc.gov. DLCP's own answer for an out-of-District business is deliberately soft, that a licence may be required depending on the business activity, so if you have no District premises and only a remote worker, ask DLCP rather than assuming either way. A business expecting $2,000 or less of gross annual revenue is exempt from the licence altogether, and one between $2,000 and $10,000 is exempt from the fee. Budget for four errands: Office of Tax and Revenue, Department of Employment Services, Department of Licensing and Consumer Protection, and an insurance broker.

Does District of Columbia require income tax withholding?

Yes. You register with the District of Columbia Office of Tax and Revenue, before your first district payroll, by completing the fr-500 combined registration on mytax.dc.gov; there is no charge for registering, and an account is never created just by filing a return or making a payment.

District withholding follows where the worker LIVES, and nothing else, which is the reverse of almost every state. The Home Rule Act forbids the Council to impose any tax on the personal income, directly or at the source, of any individual who is not a District resident, so the District has no nonresident wage tax to withhold. The practical result surprises people in both directions. Someone who lives in Virginia or Maryland and commutes into your Washington office generates zero District withholding: they hand you Form D-4A, Certificate of Nonresidence, you keep it on file, and they settle up with their home state. Someone who lives in the District and works remotely for your out-of-state company does generate District withholding, and you must withhold from a District resident even where you are not required to withhold federal income tax because the employee has certified minimal liability. Collect Form D-4 from every District resident at hire and re-request it before 1 December each year; if a resident fails to file one, withhold as though they claimed no allowances. Reporting is quarterly on Form FR-900Q, due the last day of the month after the quarter, filed electronically on MyTax.DC.gov, and you must file even in a quarter with nothing withheld unless you have filed a final return. Deposits run on a separate clock, due by the 20th of the month following the month withheld, and payments over $5,000 must be electronic. You need a federal employer identification number to file; a social security number is not accepted, which catches household employers. A dishonoured payment costs $65.

What unemployment insurance does District of Columbia charge a new employer?

A new District of Columbia employer pays 2.7% on the first $9,000 each employee earns, so roughly $243 per employee in the first year. Read 2.7% as the floor, not the bill. The statute sets a newly liable employer's rate at the average rate paid by all employers in the year to 30 June, rounded up to the next tenth of a percent, or 2.7%, whichever is higher, and the Department's employer portal confirms that for 2026 the new employer rate stays at 2.7%, the taxable wage base stays at $9,000, and Tax Table VI stays in effect for everyone else. On top of the contribution sits a separate administrative funding assessment of 0.2% of taxable wages, paid by rated and reimbursable employers alike on the same first $9,000, capped at $18 per employee per year. So a new employer's real cost is 2.9% of the first $9,000, about $261 per employee for the year, which is one of the cheapest unemployment bills in the country because the wage base is so low. Liability starts immediately: you become liable the first day you pay wages for services performed in the District, with no dollar or twenty-week threshold, and register at essp.does.dc.gov. Household employers are the one exception, becoming liable from the start of the first quarter in which they pay $500 or more in aggregate wages. You stay on the new employer rate until you have completed 36 months of liability as of the 30 June rate computation date, then you are rated on your own experience. Terminating liability is a positive act: email the Tax Division in writing once you have no employees and do not expect to hire. Both the rate and the wage base are reset every January.

Do you need workers compensation insurance in District of Columbia?

Yes, from your first employee. District of Columbia sets no headcount to reach, so there is no free window before coverage is required.

• every private employer with one or more employees in the District

There is no free headcount. Both the Office of Workers' Compensation FAQ and the Notice of Compliance poster say it in the same words: you are required to have workers compensation insurance coverage if you have one or more employees. Homeowners are caught too, once a domestic worker is employed for 240 hours or more in any calendar quarter in the current or previous year. Self insurance is possible but must be approved by the office in advance. The reach of the Act is worth checking before you assume a remote worker is someone else's problem: it covers an injury that happens in the District, and also an injury outside the District where the employment is principally localized in the District, and an employee can claim here even after being paid under another state's system, with the District award reduced by what the other state paid. Two paperwork duties come with the policy. You must display the Notice of Compliance poster, naming your insurer, at each worksite. And you must file Form 8 DCWC, the Employer's First Report of Injury, with the office and your insurer as soon as possible and no later than ten working days after you learn of an injury, with a civil penalty of up to $1,000 for missing it. Going uninsured is the expensive one: a civil fine of not less than $1,000 and not more than $10,000, and in a corporation the president, secretary and treasurer are each liable for that fine and are also severally and personally liable, jointly with the company, for the compensation the injured worker is owed. Concealing assets to dodge payment is criminal, up to $10,000 or a year in prison.

How quickly must you report a new hire in District of Columbia?

Within 20 days of the date an employee begins employment in the district or is rehired; an employer transmitting magnetically or electronically may instead send up to 2 transmissions a month, not less than 12 nor more than 16 days apart. Reports go to the District of Columbia Directory of New Hires, run for the Office of the Attorney General Child Support Services Division.

The District's definition of who you report is keyed to a form rather than to a job title: a newly hired employee is an employee for whom you are required to complete a new IRS Form W-4. Rehires count on the same 20 day clock. That W-4 hinge is the practical difference from Connecticut and New Jersey, which expressly sweep in 1099 contractors above a dollar threshold; no primary District page or code section extends the duty to independent contractors, so we do not read it as covering them, and if you rely on that, keep the reasoning with your records. Reports go to the District of Columbia Directory of New Hires at dc-newhire.com or by mail to its processing address in Norwell, Massachusetts, which looks wrong but is the address the Attorney General publishes. Penalties are modest and recurring rather than one-off: a civil penalty of $25 for each employee you failed to report, assessed for each calendar month until you comply, rising to $500 per employee where the employer and the employee conspired to withhold or falsify the report. The Attorney General enforces it.

Does District of Columbia have paid family leave or state disability insurance?

This is the mirror image of Connecticut, Rhode Island and New Jersey, and getting it backwards would be an expensive error. District Paid Family Leave is funded entirely by employers. The statute says a covered employer shall contribute an amount equal to 0.75% of the wages of each of its covered employees, and the Department states plainly that the tax is 100% employer funded and may not be deducted from a worker's paycheck. The employee rate is a confirmed zero, not a missing number. There is no wage cap on the 0.75%, which is the detail that makes it bite: unlike unemployment insurance, which stops at $9,000 of wages, this runs on every dollar, so a single $150,000 employee costs $1,125 a year. The rate rose from 0.26% to 0.75% on 1 July 2024 and the Office of Paid Family Leave has published a quarter-by-quarter table holding it at 0.75% through all four quarters of 2026. Be careful which District page you read: the Department's own About the Office of Paid Family Leave page and its Employer FAQ PDF both still print the old 0.62% figure, and the current-year quarter table and the code are the ones to believe. Coverage turns on where the person works, not where you are: a covered employee is one who spends more than half their working time for you in the District, telework included, so a company with no District premises and one District-based remote worker owes this. There is no small-employer exemption and no minimum headcount. Excluded are the District government, the federal government, the Washington Metropolitan Area Transit Authority and religious institutions. You pay it on the same Department of Employment Services account and the same quarterly wage report as unemployment insurance, due the last day of the month after the quarter, or by 15 April for annual filers; employers with fewer than six employees may use the paper PFL-30 worksheet. Self-employed people opt in during a November to December open enrolment window and cannot opt back out for three years if they did not join when first eligible. Benefits are up to 12 weeks each of parental, family and medical leave plus two weeks of prenatal leave. Note that the District has no separate temporary disability insurance scheme of the New York or New Jersey kind: this one programme is the whole of the state paid leave cost.

Do you need a sales tax permit in District of Columbia?

This is a confirmed free permit, stated twice and affirmatively. The statute directs that the Mayor shall issue to the applicant, without charge, a certificate of registration for each retail establishment named in the application, and the current FR-800 instructions say there is no charge for registering. No bond or security deposit is published for a sales tax registrant, so none is recorded. Free does not mean cheap overall, and this is where District newcomers get caught: a retailer doing business in the District also needs a Basic Business License from the Department of Licensing and Consumer Protection, which is $99 for two years, and that licence in turn requires a Certificate of Clean Hands and a Certificate of Occupancy or Home Occupation Permit. Selling without the certificate of registration can be fined up to $50 for each day you do business without one. Filing frequency follows your liability rather than your size: monthly Form FR-800M if your liability is $1,201 or more per period, and monthly is mandatory for every marketplace facilitator and every remote seller regardless of size; quarterly FR-800Q from $201 to $1,200; annual FR-800A at $200 or less. All are due the 20th of the month following the period, and you file even in a period with no sales. One trap sits outside the sales tax entirely: under the Employer Use Tax Return Act any employer that files a District withholding return and is not otherwise registered to collect sales tax must still file an annual use tax return by 20 October, so registering for payroll can create a filing duty you did not ask for.

Does a marketplace like Amazon or Etsy handle the tax for you?

The District puts the duty squarely on the platform and leaves the seller no wriggle room to argue about it. The statute says marketplace facilitators shall collect and remit sales tax on all sales they make on their own behalf and all sales they facilitate for marketplace sellers to customers in the District, regardless of whether the seller would have had to collect had the sale not been facilitated. It applies as of 1 January 2019. A facilitator is any person providing a marketplace that lists, advertises, stores or processes orders for a seller and directly or indirectly collects payment from the buyer and remits to the seller, whether or not it is paid for the service, which is broad enough to cover platforms that do not think of themselves as marketplaces. Facilitators must register with the Office of Tax and Revenue and file monthly. For the seller the important consequences are on the return rather than in the law: the FR-800 has a Less Marketplace Sales line, so you report the facilitated sales in gross sales and then back them out, and the form validates that marketplace sales never exceed gross sales. And the threshold that decides whether you must register at all is measured on all your retail sales delivered into the District, so sales that Amazon or Etsy already collected on still push you over the line and drag your direct sales into the net.

If your sales drop, when can you stop collecting?

The District publishes nothing called a trailing nexus policy, but the economic nexus test builds one in by looking backwards at a closed year. A vendor with no physical presence in the District is engaging in business here if, in the previous calendar year or the current calendar year, it had gross receipts from all retail sales delivered into the District exceeding $100,000, or 200 or more separate retail sales delivered into the District. Because the previous-calendar-year limb stands on its own, crossing the line in one year obliges you to collect for the whole of the next year no matter what your sales do, and you only fall out at the following January's measurement. Dropping below the threshold does nothing to the registration itself. The Certificate of Registration stays live and returns stay due until you tick the final return option on an FR-800, which the Office of Tax and Revenue cancels your filing requirement on, and its instructions say to use that option only if you are actually going out of business. So treat deregistration as a separate decision from the threshold test, and expect delinquency notices if you simply stop filing.

Does District of Columbia charge a tax on revenue rather than profit?

The ballpark fee, formally the sports facilities fee, is the only District charge measured on gross receipts rather than profit, which is why it sits here rather than either franchise tax. It was created to pay for the Nationals stadium and it is still being collected. It reaches any business that files a District franchise tax return or pays unemployment insurance contributions and has $5 million or more of annual District gross receipts, and it is a flat bracket amount rather than a percentage, remitted on Form FR-1500 through MyTax.DC.gov on or before 15 June each year against a tax year running June to May. Each member of a combined group files and pays its own. Below $5 million you owe nothing, so most readers of this page never touch it, and it is nothing like Washington's business and occupation tax or Ohio's commercial activity tax in shape. What deliberately does NOT sit here is either franchise tax, because both are taxes on net income: the corporate franchise tax and the unincorporated business franchise tax are each 8.25% of District taxable income. Gross receipts still reach into them through the minimum tax, which is $250 if your District gross receipts are $1 million or less and $1,000 if they are more, and is payable even in a loss year. The bigger surprise for anyone expanding into the District is the unincorporated business franchise tax, because it taxes pass-throughs as entities. Any person or entity carrying on a trade or business in the District, or receiving income from District sources, is an unincorporated business and files Form D-30 if gross income exceeds $12,000, and that catches partnerships, limited partnerships, LLCs, sole proprietors, trusts and estates, and an individual whether or not they are a District resident. So a Virginia LLC with District clients can owe an 8.25% entity-level tax it pays nowhere else. Two escapes matter. The D-30 allows a deduction for salaries for the owners' or members' own services, capped at 30% of District net income, plus an exemption of up to $5,000. And a business is outside the tax entirely where more than 80% of gross income comes from personal services actually rendered by the owners or members and capital is not a material income-producing factor, which exempts a lot of consultancies and professional practices. Under $12,000 of gross income you file Form D-30N, an affidavit of gross income, mainly so you can obtain a Certificate of Clean Hands.

Do you have to register your out-of-state company in District of Columbia?

$220 for the Foreign Registration Statement, Form FN-1, and the price is the same for a foreign LLC and a foreign for-profit corporation. The District uses one form and one fee for every for-profit foreign filing entity, including limited partnerships, limited liability partnerships, general and limited cooperative associations and statutory trusts, which is unusually simple. A foreign nonprofit pays $80. Amending or withdrawing the registration is another $220, or $80 for a nonprofit. Filing online through CorpOnline is paid by card.

The District is not a state, so there is no Secretary of State here: you register with the Department of Licensing and Consumer Protection, the agency formerly called DCRA, and the statutory authority is the Business Organizations Act in Title 29 of the DC Code. There is no deadline in days, only the rule that a foreign filing entity shall not do business in the District until it registers. The safe harbour list is the usual one, and it does cover selling through independent contractors, soliciting orders that require acceptance outside the District, isolated transactions and doing business in interstate commerce. Two things on the FN-1 cost people money. Item 6 asks the date you started or will start transacting business in the District, and the instructions warn that an entity which commenced business previously may be liable for back reports and back fees, and tell you to call the division for exact figures before filing so the application is not rejected for deficiency. And item 11 requires an original certificate of good standing from your home jurisdiction no more than 90 days old, so order it early but not too early. Failing to register is a procedural sanction rather than a fine: your contracts stay valid and you can still defend a suit, but you may not maintain an action or proceeding in a District court until you register, and the Attorney General can sue to enjoin you from doing business. The recurring cost is where the District is expensive: a registered foreign for-profit entity files a biennial report costing $300, plus a $100 late fee, due by 1 April of the year after registration and every second 1 April after that, and omitting the required ownership information can get your registration terminated. Read the FN-1's own warning before you assume you are done, because it says this filing does not license the entity's activity, issue the permit or register it for taxation purposes. A Basic Business License from the same department and an FR-500 with the Office of Tax and Revenue are both still ahead of you.

Where these figures come from

Every number on this page was read on District of Columbia's own agency pages, its statute, or a current-year official form, and this record was last reviewed on 2026-09-08. Where a state's explainer page disagreed with its statute or its current form, we followed the statute or the form and said so in the relevant section, because a state's consumer-facing pages are often the last thing updated when a figure changes.

Anything we could not confirm on a primary source is left blank rather than estimated. A missing figure on this page means we could not verify it, not that it is zero.

This is general information, not legal or tax advice. Rules change and your circumstances matter. Confirm anything you are about to act on with the agency named beside it.