If an employee lives in a different state then could we mark him as tax exempted from our home state?

That's a great question, Iftikhar Ahmad.

Where your employees live and work determines the state payroll taxes you and your employees are subject to. I'd recommend checking with your state tax agency to see what applies to the setup. 

To add the location, I'd suggest following these steps: 

1.  Go to Payroll, then Employees.
2. Select your employee.
3. From Employment details, select Start or Edit.
4. From the Work location dropdown, select Add work location. Or select an existing location, then Save.
5. Search your address. If you don’t see your address, select Enter manually. 
6. Enter your work location address, then select Add location. Note that this must be a physical address and not a P.O. Box. 
7. When finished, select Save.

For more details, please see this article: Set up and Manage Work location.

Additionally, I've added this article that'll help you create direct deposit or paper paychecks for your employees: Create and Run your Payroll.

Please comment below if you have any other concerns or additional questions about managing employees. We're always here to assist you.

Hi, Just_me.

I appreciate you for always sharing your knowledge about QuickBooks. This will definitely help other users as well in the future. Please keep on posting here in the Community.

Keep safe and have a great rest of the day.