QB Issue Resolution:

Does the college student have an address in California? Such as dorm or housing? Enter that in, and you don’t need to take state taxes out of their paycheck, just Federal. When you set up the employee’s payroll info, in taxes under state tab, click the drop down menu for filing status and check ‘exempt/ nonresident’. Just make sure your tax preparer has the correct address when sending out the W-2s.

Resolution for Issue 'If I have an employee with an out-of-state address (e.g., a college student), but my business is entirely local, do I really need to get Tax ID info for that state?' available: Yes (Solved).
Source: Intuit Community forum.

If I have an employee with an out-of-state address (e.g., a college student), but my business is entirely local, do I really need to get Tax ID info for that state?: this issue or error code is a known issue in Quickbooks Online (QBO) and/or Quickbooks. Support for this issue is available either by self-service or paid support options. Experts are available to resolve your Quickbooks issue to ensure minimal downtime and continue running your business. First try to resolve the issue yourself by looking for a resolution described below. If it is a complex issue or you are unable to solve the issue, you may contact us by clicking here or by using other support options.

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