The California Franchise Tax Board has asked CAPSO to bring the following information regarding nonresident withholding responsibilities to the attention of our members and their affiliated schools:
If you pay California source income to nonresidents of California, the Franchise Tax Board (FTB) wishes to make you aware that unless certain exceptions apply, you must withhold and send to the FTB seven percent of all payments in excess of $1,500 paid during the course of a calendar year. (Revenue and Taxation Code Section 18662 and FTB Publication 1017, Rev. 12-2007)
What is considered California source income?
For your purposes, California source income may include, but is not limited to:
- Payments to consultants, trainers, and infrastructure contractors.
- Other non-wage payments made to those who service education systems.
Is nonresident withholding a new tax?
No. While laws governing nonresident withholding are not new, FTB's goal is to better educate withholding agents, in this case, education associations and their affiliates, on their responsibilities. Nonresident withholding is a prepayment of tax similar to the Employment Development Department's payroll tax withholding on California residents' wages.
To obtain withholding procedures, information, or forms from the FTB:
- Visit the FTB website.
- Review FTB Publication 1017, Resident and Nonresident Withholding Guidelines.
- Phone the FTB at (888) 792-4900, or (916) 845-6262.
- Send an e-mail inquiry to wscs.gen@ftb.ca.gov Type "Nonresident Withholding" in the subject line. (Please note that this is not a secure e-mail address. Please do not send confidential information.)
