CA experts, need your help

[ILLMAS]

For those that know employment and income tax laws, a client of mine temporarily hired an employee that lived in CA, but worked for a corporation in IL, the employee requested for CA withholding and the employer went ahead and registered with EDD back in 2014 to submit payroll quarterly filings etc...  Fast forward to 2017, my client received a call from the CA Department of Revenue letting them know they need to file a state corporate tax return because they registered with the state, my client disagreed and informed them they had no business in CA and only hired an employee for a couple of weeks.  Would hiring employee in CA be a cause to have to file a state corporate tax return?  Supposedly the agent said yes even though they had no sales in CA.

[JRS]

I have a client (personal friend) who has worked for an s corp in Georgia since 2010.  I checked with him and the s corp and the corp has never been contacted by anyone from California.  I also believe, but not positive, the call should have originated from the FTB.

[ILLMAS]

@JRS you are correct it was the FTB, I just got off the phone with the department and in my case the client is subject to the franchise tax for two reasons:

1.  Hired a CA employee

2.  One of the officer is a resident of CA

Here is something to pass on to your friend:  https://www.ftb.ca.gov/forms/misc/689.pdf

[easytax]

Confused !!!!!

By the brochure Illmas shared, basically if I have a CA client, then I am getting money from CA and am subject to the CA tax system???????

Maybe because I am studying Catherine's links on the Constitutional things my mind has fried (not far to go normally) but is CA trying to cover everybody and everything.      Predominately my clients are PA, NY, OH and Alaska.

   Thanks in advance for ANY clarification.

[JRS]

Ca will go after anything they can.  They figure they have nothing to lose.  I think they sometimes act like spammers hoping someone will pay rather than fight them.

[BulldogTom]

California has a very convoluted tax system.  And the appeals process is even worse. 

Having an employee in the state working is an automatic way to require a business tax return.  You can't just do the PR tax returns to the EDD.  The EDD shares information with the FTB. 

From the original post, the company had an employee working in the state, which gives them a presence in the state, which triggers the business tax return filing requirement.  The penalties and interest will be applied and will not be abated.  The tax returns need to be filed and the taxes, penalties and interest paid.

Tom
Newark, CA

[Catherine]

1 hour ago, JRS said:

I think they sometimes act like spammers hoping someone will pay rather than fight them.

Massachusetts is doing similar stuff these last couple of years.  I could write pages, but instead will just say that they disgust me.

[Max W]

Yes. Having an employee in this greatly overtaxed state, is defined as "Doing Business" when they exceed certain thresh holds shown in the link.  The thresh holds increase each year.  

https://www.ftb.ca.gov/businesses/Doing-Business-in-California.shtml