California Business Taxes

California is home to some of the most thriving businesses in the country, from tech in Silicon Valley to show business in Los Angeles. However, the state is also among the most tax-expensive places to run a business. This is partly due to the fact that the state levies higher-than-average business taxes. The state’s minimum franchise tax is $800 for pass-through entities like S corporations and LLCs. This is in addition to the state income tax and the alternative minimum tax (AMT). In order to offset this, the state offers a multistate offset program that allows companies owed taxes across multiple states to transfer their refund back to the state of California.

Businesses that have nexus in California must register with the CDTFA and charge, collect, and remit sales and use tax to the state. This includes remote sellers that do not participate in the Streamlined Sales Tax Registration System (SST). The law governing the collection of sales and use tax is complicated, so it is best to consult with an accountant or other professional.

California Corporate Tax

The State of California taxes business owners in different ways. These taxes include the corporate tax, alternative minimum tax, and franchise tax. Almost all businesses in the state pay one or more of these taxes.

The California corporate tax is a flat rate of 8.84% on net taxable income from business activities in the state. It applies to both C corporations and LLCs that elect to be treated as C corporations. This tax is higher than the national average. The state also imposes an alternative minimum tax (AMT) at 6.65%.

In addition to state taxes, businesses in the state must pay federal business taxes. These taxes are based on federal taxable income and may be in the form of self-employment or FICA tax. The amount of these taxes will vary based on the type of business entity. For more information, visit Nolo’s 50-State Guide to Business Income Taxes.

How to Pay California Business Taxes?

To pay your California business taxes, you must send a check or money order to the Franchise Tax Board. Make sure to write the tax year and tax period on the payment. You should also include your name and Social Security or Individual Tax ID number. You can also make payments online. If you choose to pay in person, you must make an appointment at a field office.

California Business Tax Requirements

The state of California has multiple tax rates and filing requirements that can be complex for small business owners. Understanding your responsibilities can help you navigate the process and avoid costly mistakes. You can also partner with a local tax professional to provide valuable insights and guidance.

In addition to federal income taxes, California imposes a variety of business-related taxes, including corporate tax and alternative minimum tax. These are levied on C-Corporations as well as on “flow-through” entities like S-Corps, limited liability companies (LLCs), partnerships, and sole proprietorships.

The state also imposes an annual franchise tax on LLCs and other limited liability entities. The tax is based on the company’s gross income and is payable in addition to federal taxes. This tax is similar to other taxes that are imposed by cities and counties, such as a city income tax in San Francisco or a 12% lodging tax in Los Angeles County.

California Business Tax Due Dates

In California, business tax filing deadlines vary depending on the type of business. For example, if your business is a C corporation, you need to file your return and pay your taxes on the 15th day of the fourth month after your tax year ends. For more information, visit the California Franchise Tax Board website.

During the winter storm disaster last year, the IRS and state of California provided significant relief to millions of taxpayers by extending deadlines for making estimated tax payments and filing tax returns. While this was a welcome reprieve for many, it’s time to get back into the habit of regular planning and making tax payments again.

If you are self-employed, your California estimated tax payment due dates are generally April 18, June 15, September 15, and January 15. You may use Form 540-ES to make your deposits. You can request an extension using Form 540-ES-RT if you need more time.