Boy oh boy, as a company, you do this to the IRS, they will come down on you like a ton of bricks and chain your doors shut with very little warning. It’s not like erring or underpaying your Fed income taxes...you’ll get several polite warnings. But they go apoplectic on failure to remit withholding taxes. It should be said that “withholding taxes” on the IRS side include SS tax (FICA) and UI, as well as income tax. On the state side, it’s just income tax. (maybe it’s the state that collects UI, it’s been a while since I did a payroll)
They wouldn’t be doing this if there wasn’t some sort of “permission”...hard as it may be to believe. Anyone in biz knows you do not mess with withholding taxes. You’ll unhinge the IRS big time.
Anytime a state makes financial concessions to bring a large employer into the state you will see a form of this payment method. If the state paid up front and then the company went bankrupt there would be politicians running for cover, this way the employee gets a job and pays his/her share of commissions for having that job. Much better than living on welfare.
If you want to get around this just declare 15 children and your state taxes drop to zero.