I am assuming this is a tax that the employer will pay, correct?

If so:

Description: LST Tax

Tax Type: This would likely be 13 - Local State Tax (or you could do None)

Calculation Type: 1 - Deduct from Employee

Calculation Method: 11 - Per Pay Period

Default rate = 1.00

Default Max - 52.00

Max type = 8 - Dollars / Year

I would think this would be subject to all the taxes (all boxes checked) but not 100% sure.

I don't think there is a way to monitor it for an employee who wont make over $12k. Someone else may have a better idea, but I would likely just make it a point to check at year end and do a journal entry to reverse any amounts charged for an employee who didnt reach the $12k thrseshhold. That gets a little tricker depending on how often the tax is paid in and if you could request a refund.

Ralls, thank you for the help!  That is correct, the employer will pay this.  I ran into trouble trying to use 13-Local Tax Type, so I chose Tax Type 0-None, Default rate 1.00, Default Max 52.00, Max Type 8-Dollars/year.  It seems to be working the way we wish it to, my only other thought is, perhaps I should create a separate tax liability account to post it to (i.e. something different from 2335 Local Tax).  What do you think?

Sure thing. Glad it is working right. Yes, i would agree. I would probably make a separate liability account to post it to. You might even look into using the option of "Use Employee # as subaccount". That might be helpful to have it broken out i you do need to seek a refund for someone under $12k of earnings.

Also, looking at some of my calculations that are similar to this situation... you might want to uncheck all of the "subject to" boxes. It might be fine either way since it is an employer deduction and might not effect the taxes withheld. You could maybe do a test with two different calculations.. Maybe someone can add some input to that. 

Good thought.  I was wondering if I should have those checked, or not.  I'll try it both ways and see what we come up with