I had the same problem with a client from LA.  I called Sage and they said it was because there was not a payroll that was paid in the third month that covered time worked on the 12th.  I guess you proved that wrong.

Interesting.  Yes, we made sure that check had a range that covered the 12th.  I should test again with the start date of the 11th, just for kicks...

And so starting with the 11th works.  Looking like there is a logic error with "greater than" versus "greater than or equal to" somewhere...

bethbowers I ran a quick test paying a semi-monthly TN employee using pay period dates of 3/12/2021-3/26/2021 and the correct employee count pulled into the 3rd month on the TN LB-0456 form.  If you are still experiencing incorrect employee count please call support so they can help troubleshoot this further.

You should test it again for the 3rd quarter using the dates that I used instead of March dates.  I just ran this on my demo company for just one employee with a starting date of 9/12 and my report showed 0 employees.