Contact: Fineman West (Los Angeles, California, USA)
The Franchise Tax Board recently rereleased an announcement about nonresident withholding. This rule applies to California services provided and when paying rent, royalties, trust distributions, business distributions, prizes, winnings and endorsement fees within California.
For services and other covered payments to vendors that exceed $1,500 in a calendar year, checks mailed to an address outside of CA should be screened for possible 7% CA withholding, while checks mailed within CA are assumed to be CA residents or CA registered businesses. There is a 2015 CA Form 590, Withholding Exemption Certificate, which can be filled out by CA payees to guarantee there will be no penalty by the payer. For out-of-state businesses registered with the CA Secretary of State, filing CA income tax returns are exempt from withholding.
Non-resident individuals and businesses can request a waiver from 7% withholding by filing 2015 CA Form 588, Nonresident Withholding Waiver Request, with the Franchise Tax Board. If there are expenses that will offset the amount received, they can make a reduced withholding requesting to FTB on 2015 CA Form 589. Non-residents that do not meet exceptions, 7% withholding should be made on all payments.
For further information, please contact Fineman West & Co. to speak to one of our associates.
