California Business Portal

When do I start paying payroll taxes?

Generally, a business becomes subject to state payroll taxes upon paying wages over $100 in a calendar quarter to one or more employees. Wages consist of compensation for services performed, including cash payments, commissions, bonuses, and the reasonable cash value of noncash payments (like meals and lodging) for services. Once subject, an employer must complete and submit a registration form to Employment Development Department (EDD) within 15 days. EDD's Payroll Tax Seminars page offers no-fee seminars to assist employers in complying with California’s payroll tax laws.http://www.edd.ca.gov/Payroll_Tax_Seminars/

Examples of when a business becomes subject:
  • A sole proprietor hires an employee during the month of March at a wage of $75 per month. The employer is subject effective April 1 since the employer did not pay the employee over $100 during the first quarter of the year (January-March) but will pay over $100 during the second quarter (April-June).
  • A corporation operates without any employees except for the corporate president. The corporation is an employer and is required to register if the corporate president is paid wages of over $100 in a calendar quarter.
  • A two-person partnership operates a business in which each partner draws a salary of $1,000 during the first quarter of the year. When one partner goes on vacation, an employee is hired and paid $95 during the quarter. The partnership is not required to register as an employer since partnership draws are not considered wages and the employee who was hired did not receive wages of over $100 in the calendar quarter.
Use e-Services for Business to apply for your employer payroll tax account number. It is fast, easy, secure, and available 24 hours a day/7 days a week. https://eddservices.edd.ca.gov/

Enroll for a username and password: Follow the instructions on the e-Services for Business Enrollment Information page
Complete the online registration application.
Use e-Services for Business to file returns, make deposits, and keep your account information up to date.

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