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General Withholding Requirement: New Jersey gross income tax generally must be withheld from wages paid to resident employees for services performed either within or without the state and from wages paid to nonresident employees for services performed in the state.owever, when resident employees perform all their services outside the state, their wages are subject to New Jersey withholding only to the extent the New Jersey tax exceeds the other state's withholding tax on the same wages.
The chief distinction is that state withholding is based on state-level taxable income and federal withholding uses federal taxable dollars. State withholding rules tend to vary among the states, while federal withholding rules are consistent everywhere throughout the United States. How Withholding Works. Both state and local governments may impose withholding on wage income, but only based on the state taxes; they may not withhold federal income taxes. Employers can be required to automatically deduct withholding from their employees' paychecks for federal and state income taxes and Social Security taxes.