As defined in 31 CFR part 215, "employees for state income tax withholding", means all employees of an agency, other than members of the armed forces. For city and county income or employment tax withholding, it means: 

• Employees of an agency,
• Members of the National Guard, participating in exercises or performing duty under 32 U.S.C. 502, or
• Members of the Ready Reserve participating in scheduled drills or training periods or serving on active duty for training under 10 U.S.C.10147.

The term does not include retired personnel, pensioners, annuitants, or similar beneficiaries of the federal government who are not performing active civilian service or persons receiving remuneration for services on a contract-fee basis.