California Non-wage Withholding Requirements for Nonresidents

UNIVERSITY OF CALIFORNIA, DAVIS BERKELEY ● DAVIS ● IRVINE ● LOS ANGELES ● MERCED ● RIVERSIDE ● SAN DIEGO ● SAN FRANCISCO ● SANTA BARBARA ● SANTA CRUZ ACCOUNTING AND FINANCIAL SERVICES 1441 RESEARCH PARK DRIVE DAVIS, CALIFORNIA 95618 Tel (530) 754-1829 Fax (530) 752-1300 August 20, 2018 RE: California Non-wage Withholding Requirements for Nonresidents Below is an explanation of the State of California non-wage withholding requirements for nonresidents as outlined in the California Revenue and Taxation Code Section 18662, 18664, and 18666 The Franchise Tax Board (FTB) provides a summary of the non-wage withholding on the web page titled: A Summary of FTB’s Nonresident Withholding Process Withholding on Payment to California Nonresidents Payments made to California nonresidents, including corporations, limited liability companies, and partnerships that not have a permanent place of business in this state are subject to a seven percent income tax withholding (California Revenue and Taxation Code Section 18662) Types of income subject to withholding include, but are not limited to, payments for services performed in California and payments of leases, rents and royalties for property (real or personal) located in California No withholding is required on payments for goods The Franchise Tax Board does provide options for payees who believe the 7% withholding will reduce in over withholding Below are brief descriptions of these options Any certificate held by the payee to allow reduced California Withholding must be presented to the University prior to payment Once funds are withheld from payment and remitted to the State of California, the payee will need to obtain a refund when filing the annual California Income tax return • Withholding Exemption Certificate, Form 590 – Payee who is a California resident or a business with resident status can use FTB Form 590 to certify exemption from nonresident withholding No withholding required with a valid withholding exemption certificate • Nonresident Reduced Withholding Request, Form 589 - Nonresident payee can use a Form 589 to itemize expenses against the California source income FTB provides payer with a letter stating the reduced withholding amount • Nonresident Withholding Waiver Request, Form 588 - Nonresident payee who qualifies can use Form 588 to get a waiver from withholding based generally on California tax filing history Payer keeps a copy of the determination letter in records No withholding required with a determination letter Annually, the University will provide completed FTB Form 592B to each nonresident payee who was subject to non-wage withholding