Pay Your California Small Business Taxes

Keeping your California business legally compliant means understanding and fulfilling your business’s tax obligations at the local, state, and federal levels. If this sounds scary, we’re here to help. Read our guide to learn more about the types of state business taxes you might need to pay as an California small business, how to pay them, and when they are due. Our Worry-Free Compliance Service keeps track of your business’s important filing and compliance deadlines and alerts you when a deadline is coming.

Manage everything in one place: maximize tax deductions, send invoices, and get paid fast. Learn how ZenBusiness Money can help you today.

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If you are a California small business owner, you know how important it is to pay your taxes. Paying local, state, and federal taxes is one of those unfortunate but regular rituals that all California businesses must take care of to stay legally compliant. Keeping track of all of your taxes and how to file them is difficult, especially when you are focusing on running your business. But we are here to help. This guide will teach you about state taxes you might face as a California business owner. You’ll also learn how we can help make the process easier when tax time rolls around. 

If you’re looking for more comprehensive compliance help, our Worry-Free Compliance Service can handle regular required state filings like statements of information and more. 

If you’re looking for information about federal taxes, head over to our page on federal taxes for small businesses.

Step 1: Establish your California business’s corporate income tax obligations

Understanding how to file small business taxes in California can be confusing and time-consuming. Any company that transacts business in California or is domiciled in California is subject to the state’s tax laws. The type of company you have dictates the amount your California small business pays in taxes. Corporations are taxed at the California business tax rate of 8.84%. Business structures such as S corporations, limited liability companies (LLCs), partnerships, and sole proprietorships are pass-through entities. With these companies, the profits pass through to the owner who then pays California’s personal income tax rate on the income.  

There are specific tax due dates required by the state. The type of business structure will determine when to file. For corporations, your California small business tax filings are due on the 15th day of the 3rd month after the close of your tax year. Most businesses in California have the requirement to file estimated quarterly taxes. For example, if your tax year starts January 1st, then the first estimated payment is due April 15th.

You can file your tax payment electronically, by mail, or in person. California has an online tax filing service called CalFile.

Step 2: Determine your California business’s withholding taxes

Other than income taxes, the other important filing is your California small business withholding taxes. Payroll and withholding taxes must be paid if your company has employees. If your company employs workers, payroll and withholding taxes need to be paid. The amount of the employee’s income and the number of allowances on the employee’s Withholding Allowance Certificate dictates the amount of tax to withhold. 

As of 2021, California’s withholding tax percentage is 7% of qualified income. Pay your California withholding taxes online. Pay withholding taxes each quarter the employee earns money. More information about the payment of withholding taxes can be found on the Franchise Tax Board’s website.

Step 3: Establish your California business’s additional state tax obligations

There are other California small business taxes that need to be paid on a quarterly or yearly basis.

Unemployment Insurance Tax

Employers also need to pay taxes for unemployment insurance (UI). Your UI payment is a percentage of the first $7,000 in wages the employee earns in a calendar year. New employers pay 3.4% for a period of two to three years. California will notify employers of their new UI percentage rate each December.

Employment Training Tax

The Employment Training Tax (ETT) is a tax that every business has to pay. The money goes to fund employee training.

State Disability Insurance Tax

The State Disability Insurance Tax (SDI) funds the wage benefits for employees who suffer from non-work-related injuries and illnesses or physical conditions that prevent them from working. The SDI tax also funds paid family leave benefits.

California Personal Income Tax

The California personal income tax (PIT) is paid to provide resources for California public services, such as schools, public parks, roads, and health and human services.

Step 4: Prepare to file and pay your California small business taxes

The last step in the process is to draft your tax returns and file your business taxes with California. You can file online, by mail, or in person by dropping off your tax filings along with a check or money order at your nearest Franchise Tax Board field office. 

The easiest way to be compliant with filing your business taxes in California is to maintain all of the appropriate documentation throughout the year. We can help you keep track of all of the business papers necessary to correctly file your taxes, such as receipts, accounting records, legal documents, and more. With our ZenBusiness Money App, we make it easy for California businesses to have a streamlined invoicing process to get paid quicker and keep track of their important tax documents.

Do I need an accountant?

It is a smart decision to have an experienced accountant help you draft and file your California small business taxes. A professional will be able to make sure you’re taking advantage of all of the procedures and laws that help California small businesses pay their fair share of taxes. The danger in doing your taxes yourself is making mistakes that will cost you unnecessary fines, penalties, and interest payments. The IRS’s website has a simple guide on tax preparer qualifications to help you find one that best fits your business needs.

How we can help

With our full slate of formation and compliance tools, we are here to help your California business run smoothly. With our ZenBusiness Money App you can categorize and track your business’s finances to make things easier at tax time.

If your small business is still in the formation process, our California LLC Formation Service or Corporation Formation Service can help you get started.

California Small Business Tax FAQs

  • Any net income made by a California small business is subject to the corporate income tax rate of 8.84%.

  • The California business tax rate is 8.84% of net taxable income.

  • You can file your tax payment electronically, by mail, or in person. California offers a free online tax filing service called CalFile.

  • Every corporation that’s incorporated, registered, or doing business in California must pay the $800 minimum franchise tax.

Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.

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Written by Team ZenBusiness

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