California Business Taxes: Agencies, Accounts & Filing Rules

California Business Tax Agencies and Accounts at a Glance

When you run a business in California, no single state office collects all of your taxes. Your registration, income taxes, sales taxes, payroll deductions, and local permits are split across separate state, federal, and county offices.

To coordinate general guidance across these departments, the state operates the California Tax Service Center (taxes.ca.gov), a one-stop partnership sponsored by the BOE, CDTFA, EDD, FTB, and the Internal Revenue Service (IRS). Below is how each agency fits into your compliance setup.

• edd.ca.gov: Payroll Taxes Resources Skip to Main Content English language options Select Your Language
• California FTB: Doing business in California

Who Must File: 'Doing Business' in California Thresholds

Under Franchise Tax Board rules (California Revenue and Taxation Code Section 23101), you are subject to California tax laws if you are considered to be doing business in the state. The FTB considers you to be doing business in California if you meet any one of three tests: you engage in any transaction for the purpose of financial gain within California, you are organized or commercially domiciled in California, or your California sales, property, or payroll exceed the state's annual economic nexus thresholds.

Even if your company is formed in another state and has no office in California, exceeding any single column in the FTB table below (or having California account for 25% or more of your total sales, property, or payroll) triggers California filing requirements. If you own an interest in a partnership, an LLC treated as a partnership, or an S corporation, you must include your distributive share of the property, payroll, and sales from those entities when checking whether you cross these limits.

By our calculation from the Franchise Tax Board Doing Business in California table, the sales, property, and payroll thresholds rose by 3.0% from tax year 2024 to tax year 2025 ($22,051 higher for California sales and $2,205 higher for both property and payroll), and have increased by 42.96% since the 2014 thresholds ($529,562 in sales and $52,956 in property or payroll).

Out-of-state companies whose only activity inside California is soliciting sales of tangible personal property to California customers may qualify for protection under federal Public Law 86-272, which exempts them from California state taxes based on net income. However, the FTB states that an entity protected by Public Law 86-272 may still be considered to be doing business in California and remain liable for filing a California return and paying applicable non-net-income amounts. Businesses earning income both inside and outside the state are also subject to California apportionment and allocation rules.

• California FTB: Doing business in California
• CDTFA: Permits & Licenses Skip to Main Content Alert from California Department of Tax and Fee Ad

Franchise Tax Board (FTB): Income Tax, Minimum Tax, and Credits

The Franchise Tax Board handles business tax filings for sole proprietorships, partnerships, LLCs, corporations, and charities and nonprofits. If you fail to file a required return by the original or extended due date, the FTB imposes penalties and interest.

Immediately upon registering with the California Secretary of State, all corporations (including nonprofit corporations), LLCs, LPs, and LLPs are subject to an annual minimum franchise tax of $800 paid to the FTB. The annual minimum franchise tax continues to apply until your business either applies for and is granted formal tax-exempt status by the FTB or files termination documents with the Secretary of State.

Nonprofit corporations are not automatically exempt from the $800 tax when they incorporate. To get California tax-exempt status, you must submit a separate exemption application to the FTB in addition to your federal exemption application with the IRS.

The FTB also administers California's pass-through entity elective tax, disaster loss and net operating loss deductions, and state business tax credits.

• Pass-through entity elective tax (administered by FTB for eligible pass-through businesses)
• Main Street Small Business Tax Credit II
• California Competes Tax Credit
• California Research Credit
• New Employment Credit and Homeless Hiring Tax Credit
• Motion Picture and TV Credit

• bpd.cdn.sos.ca.gov: Starting a
• California FTB: Business filing information

Worked Example: Checking Nexus and First-Year State Costs

To see how the Secretary of State and Franchise Tax Board rules work together, consider two invented scenarios written by our team using the official 2025 FTB and SOS figures.

Scenario A (Forming a California LLC): You form a new California LLC online through bizfileOnline.sos.ca.gov in May and order one certified copy of your Articles of Organization for your bank. Your initial SOS payment is $75 ($70 initial LLC filing fee plus $5 certified copy fee, with the $15 counter handling fee waived because you filed online rather than in person). Within 90 days of registration, you file your initial Statement of Information ($20 or $25 fee). Because all registered LLCs are subject to the $800 annual minimum franchise tax to the FTB, your combined first-year state registration and minimum tax baseline is $895 to $900 before any income-based taxes or local city licenses.

Scenario B (Out-of-State S Corporation Selling into California): An S corporation organized in Nevada has no California office or employees, and generates $2,000,000 in total nationwide sales in 2025, of which $520,000 comes from California customers. Although $520,000 is below the $757,070 dollar threshold for 2025, it equals 26% of the company's total sales. Because 26% exceeds the FTB's 25%-of-total-sales threshold, both the S corporation and its owners (via their distributive share) are considered to be doing business in California for 2025.

• bpd.cdn.sos.ca.gov: Starting a
• California FTB: Doing business in California

CDTFA: Sales and Use Tax Rates and Seller's Permits

The California Department of Tax and Fee Administration (CDTFA) administers state, local, and district sales and use tax programs, which generate more than 80% of all CDTFA-collected revenues. If you are doing business in California and intend to sell or lease tangible personal property that is subject to sales tax at retail, you must obtain a California Seller's Permit and prominently display it at your place of business. Registration is free on the CDTFA website.

California also imposes a 1% assessment on purchases of lumber products and engineered wood products for use in the state based on the selling price. When buying a business in California, the buyer should request a certificate of tax and fee clearance from the CDTFA to avoid liability for the previous owner's unpaid taxes, interest, and penalties. In addition, if a corporation or LLC is dissolved, terminated, or abandoned, responsible individuals who willfully failed to pay sales and use tax may be held personally liable for unpaid taxes, interest, and penalties.

If you plan to make retail sales in a single location for 90 days or less, you must apply for a Temporary Seller's Permit. Out-of-state sellers engaged in business in California, as well as Native American retailers making sales on a reservation to non-Native Americans or to Native Americans not living on a reservation, register for a Certificate of Registration - Use Tax.

Sales and use tax rates in California depend on the exact city or unincorporated county area where the transaction takes place. On the CDTFA rate schedule effective October 1, 2026, local rates start at 7.250% in jurisdictions such as Alpine County, El Dorado County, Placer County, Redding, Camarillo, and Ventura County, and reach as high as 11.500% in Santa Fe Springs and 11.750% in Lancaster and Palmdale. By our calculation from the CDTFA October 1, 2026 rate table, the spread between California's lowest and highest local sales and use tax jurisdictions is 4.50 percentage points ($45 in tax difference per $1,000 of retail sales).

• CDTFA: California City and County Sales and Use Tax Rates
• CDTFA: Permits & Licenses Skip to Main Content Alert from California Department of Tax and Fee Ad

Employment Development Department (EDD): California Payroll Taxes

If you hire employees in California, you must register with the Employment Development Department (EDD) and manage your payroll tax account through the EDD e-Services for Business online portal. California law also requires every employer to carry workers' compensation insurance to protect employees if they get hurt on the job.

California has four state payroll taxes administered by the EDD. Two are paid by the employer and two are withheld from employee wages and forwarded to the EDD. Inside e-Services for Business, employers follow a 7-step compliance workflow. First, you register as an employer, get your business information and federal EIN in order, and register for a payroll tax account. Next, you report new employees and independent contractors and withhold and pay payroll taxes under the E-file and E-pay mandate. Finally, you file tax returns and wage reports by the due dates and provide required notices, including federal and California Earned Income Tax Credit notifications, to employees.

• Unemployment Insurance (UI), Paid by the employer: Most businesses are Tax-Rated Employers paying into the UI fund. Nonprofits and public entities can elect the Reimbursable Method, and school districts can use the School Employees Fund.
• Employment Training Tax (ETT), Paid by the employer: Collected alongside UI to fund workforce training.
• State Disability Insurance (SDI), Withheld from employee wages: Mandatory payroll deduction withheld by the employer and remitted to the EDD.
• California Personal Income Tax (PIT), Withheld from employee wages: Mandatory state income tax withholding forwarded by the employer to the EDD.

• edd.ca.gov: Payroll Taxes Resources Skip to Main Content English language options Select Your Language
• California FTB: Doing business in California

California Secretary of State (SOS): Entity Fees, Statements of Information, and Termination

Your tax obligations in California are directly tied to your registration status with the California Secretary of State. Corporations (including nonprofits), LLCs, LPs, and LLPs are required to register with the SOS. General partnerships are not required to register (though they may optionally file Form GP-1 on paper), and sole proprietorships do not register with the SOS.

Every corporation and LLC must file an initial Statement of Information via bizfileOnline.sos.ca.gov within the first 90 days of registering. After that first filing, California stock corporations and qualified out-of-state corporations must file a Statement of Information every year during their calendar month of registration. California nonprofit corporations and all LLCs must file every two years during their month of registration, in either odd or even years based on the year they first registered. On the Statement of Information, stock corporations, qualified out-of-state corporations, and all LLCs must also disclose if any officer, director, member, or manager has an unappealed final labor judgment from the Division of Labor Standards Enforcement or a court for a Labor Code or wage order violation.

The SOS sends a reminder about three months before your Statement of Information due date. If you miss the deadline, the SOS sends a Notice of Delinquency giving you a 60-day grace period. If you still do not file within 60 days, the SOS notifies the Franchise Tax Board to assess and collect a monetary penalty, and your entity's powers, rights, and privileges (including the right to use its business name in California) can be suspended or forfeited.

When you close your business, the annual minimum franchise tax continues to apply until termination documents for the business are filed with the Secretary of State. You must file formal termination documents with the SOS at bizfileOnline.sos.ca.gov. There is no filing fee associated with submitting a termination document to the Secretary of State. Watch out for deceptive mailers from private companies (such as 'Business Filings Division') demanding $495 or similar fees to dissolve your company or file your Statement of Information. These letters are not from the government.

• bpd.cdn.sos.ca.gov: Starting a
• sos.ca.gov: Frequently Asked Questions :: California Secretary of State Phone Service Notice --> Some

Federal Business Taxes (IRS) and Local County/City Requirements

Alongside California state filings, every business must meet federal IRS requirements and local city or county rules. According to the IRS, your business structure determines which of the five general types of federal business taxes you pay.

At the county and city level, the California Secretary of State does not issue local business operating licenses or register Doing Business As (DBA) trade names. If you operate under a name other than your legal entity or personal name, you must file a Fictitious Business Name statement with the county clerk/recorder in the county where your principal place of business is located (California Business and Professions Code sections 17900 through 17930). Failing to register a fictitious business name can prevent you from enforcing contracts signed under that name. To check required city business licenses, local zoning rules, and state specialty permits, use the state's CalGOLD database (calgold.ca.gov). Charitable entities must also register with the California Attorney General's Registry of Charitable Trusts within 30 days after receiving assets.

• Federal Income Tax: All businesses except partnerships must file an annual federal income tax return, while partnerships file an information return. Federal income tax is a pay-as-you-go tax.
• Federal Estimated Taxes: Required if you do not pay enough income and self-employment tax through withholding during the year.
• Federal Self-Employment (SE) Tax: Social Security and Medicare tax for individuals working for themselves. You must file Schedule SE (Form 1040 or 1040-SR) and pay SE tax if your net earnings from self-employment are $400 or more (or $108.28 or more in wages from an exempt church or qualified church-controlled organization).
• Federal Employment Taxes: If you have employees, you must obtain a federal EIN and handle Social Security and Medicare taxes, federal income tax withholding (Form 941, Form W-2, Form W-4), and Federal Unemployment (FUTA) tax.
• Federal Excise Taxes: Applies to specific activities reported on Form 720 (environmental, communications, air transportation, fuel, retail heavy trucks, manufacturers), Form 2290 (highway vehicles with a taxable gross weight of 55,000 pounds or more), and Form 730 / Form 11-C (wagering).

• IRS: Business taxes
• bpd.cdn.sos.ca.gov: Starting a

New California Business Tax & Compliance Checklist

Use this 8-step checklist written by our team from the official Secretary of State, FTB, CDTFA, EDD, and IRS rules to set up and maintain your accounts in the right order.

• 1. Register your entity with the SOS (if applicable): File online at bizfileOnline.sos.ca.gov ($70 for LLC/LP/LLP, $100 for Stock Corp, $30 for Nonprofit) and order a $5 certified copy for your bank.
• 2. File your initial Statement of Information within 90 days: Submit online at bizfileOnline.sos.ca.gov and calendar your recurring annual (Stock Corp) or biennial (LLC/Nonprofit) filing month.
• 3. Register your Fictitious Business Name (DBA) and local licenses: File any DBA with your county clerk/recorder and look up city business licenses and zoning permits on calgold.ca.gov.
• 4. Get your federal EIN from the IRS: Apply on irs.gov and set up your federal estimated tax or payroll schedule.
• 5. Set up your MyFTB account: Track your annual minimum franchise tax and state income or corporation tax filings (or submit an FTB exemption application if you are a nonprofit).
• 6. Obtain a CDTFA Seller's Permit or special tax account: Register free at cdtfa.ca.gov before making retail sales of tangible personal property, and check your exact city or county tax rate (7.250% to 11.750%).
• 7. Enroll in EDD e-Services for Business when hiring: Obtain workers' compensation insurance, register your payroll account, report new hires and independent contractors, and remit UI, ETT, SDI, and PIT.
• 8. Close accounts formally if you stop operating: File SOS termination documents (no filing fee) so the annual minimum franchise tax no longer applies, and submit Form CDTFA-65 to close out your Seller's Permit.

• bpd.cdn.sos.ca.gov: Starting a
• California FTB: Doing business in California

Flat-Price California Business Tax Filing and Bookkeeping

Aldro is the cheapest way to get your business taxes done: $399 flat, with bookkeeping at $20 a month. The flat price covers everything tax for the year, multi-state returns at the same price, the owner's personal return when the business income needs it, city and local business returns and state franchise tax reports included, and extensions and quarterly estimate reminders included. Bookkeeping covers unlimited bank and card accounts, monthly reconciliation and statements, but not payroll processing or sales-tax filing. If you are switching from Bench or another service, we start within a week of getting the documents.

• California FTB: Doing business in California
• edd.ca.gov: Payroll Taxes Resources Skip to Main Content English language options Select Your Language