California Withholding Requirements
California Revenue and Taxation Code (“R&TC”) and the related regulations require withholding of California income or franchise taxes from payments and distributions made to non-residents on California source income in excess of $1,500. Withholding however, does not apply to wages paid to employees, payments for goods and materials or sales of real estate located outside of California.
In managing withholding requirements, withholding agents can rely on a California street address as an indication of a payee’s residency status for alleviating withholding requirements. Also, in some cases, the FTB may authorize a waiver of withholding if the payee has California tax returns on file for the past two taxable years.