31 CFR §215.7

1. (a)In the case of an agreement with a State, the head of each agency is required to withhold State income taxes from the compensation of:
   1. (1)Employees of such agency who are subject to such taxes and whose regular place of Federal employment is within the State, and
   2. (2)Members of the Armed Forces who are subject to such taxes and who are legal residents of the State.
2. (b)In the case of an agreement with a city or county, the head of each agency is required to withhold city or county income or employment taxes from the compensation of any employee of the agency who is subject to the tax, and
   1. (1)Whose regular place of Federal employment is within the city or county, or
   2. (2)Is a resident of the city or county.
3. (c)In withholding taxes, the head of each agency, except as otherwise provided in this agreement, shall comply with the withholding provisions of the State, city or county income or employment tax statute, regulations, procedural instructions and reciprocal agreements related thereto.