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Steve Sims, Taxpayers' Rights Advocate.

Are You a California Withholding Agent?

Withholding Agent

One of the most asked questions these days is, “Could l be considered a California withholding agent?”

The answer to this question will depend on the facts in each case. One of the biggest misconceptions is that the requirement to withhold and remit taxes on payments of income only applies to business entities. Under California law, every individual (resident or nonresident) and every business entity, partnership, limited liability company, or corporation can potentially be responsible for withholding, remitting, and reporting on California-source income payments.

Given the broad set of requirements, a withholding agent is any person or entity with the control, receipt, custody, disposal, or payment of California-source income to a payee that meets one of several general requirements to have a tax amount withheld from payments and to remit directly to us as required.

For example, unless certain exceptions apply, a withholding agent who makes California-source income payments to nonresident independent contractors must withhold and send to us seven percent of the amount that exceeds $1,500 in a calendar year.

Penalties and interest that withholding agents may incur if they do not withhold, remit, and report the proper amounts when due can be costly. For this reason, we recommend that withholding agents analyze any California-sourced payment to determine if withholding is required under one of the withholding tax types.

Real Estate Withholding

In general, unless certain exceptions or exemptions apply, real estate withholding may be required when there is a disposition of California real property interest and the sales price of the property conveyed exceeds $100,000. For more information on real estate withholding requirement, see our FTB Pub 1016, Real Estate Withholding Guidelines.

Income at Source/Nonresident Withholding

In general, withholding may be required when there is a California-source income payment to a “nonresident taxpayer” and the total amount (for the year) is over $1,500. A nonresident taxpayer can be:

  • An individual who is not considered to be a resident of California.
  • A nonresident estate or trust.
  • A business entity (excluding banks and banking associations) that was formed or organized in any state or country other than California, and either has not qualified to do business in California, or does not have a permanent place of business[1] located in California.

In addition, there are special rules for foreign partners. For more information on income withholding, see our FTB Pub 1017 , Resident and Nonresident Withholding Guidelines, and our FTB Pub 1018, Small Business Withholding Tool.

Backup Withholding

In general, backup withholding is required whenever “backup withholding” is required by the IRS, except when specifically excluded for California purposes. Usually backup withholding is required where a payee fails or refuses to provide a Taxpayer Identification Number. For more information on backup withholding, see our FTB Pub. 1017 and our FTB Pub. 1018.

The above information is intended to provide basic information to determine if you are considered a California withholding agent. There are specific rules, guidelines, and forms associated with each withholding type. Please also see our recent YouTube video “Who is a Withholding Agent.”

Need our forms or more information?


  • Go to ftb.ca.gov and search for withholding.
  • Email us at: wscs.gen@ftb.ca.gov.
  • Do not send confidential information as this is not a secure email address.
  • Call us at:
    • 888.792.4900
    • 916.845.4900

We also offer free webinars that cover a variety of withholding topics to help our customers understand California withholding requirements. To view our pre-recorded webinars, go to ftb.ca.gov, and search for withholding webinars.

Steve Sims, EA
Taxpayers’ Rights Advocate

Follow me on Twitter at twitter.com/FTBAdvocate.

A permanent place of business means an office which is permanently staffed by the business entity’s employees.

Back to October 2012 Tax News