At a glance
- Corporate tax
- 8.84%, $800 minimum
- Tax on wages
- 1%–12.3%, +1% over $1M
- Sales tax
- 7.25% + district taxes
- Economic nexus
- $500,000 in sales
- Minimum wage
- $16.90/hr
- UI wage base
- $7,000
- New-employer UI rate
- 3.4%
- Paid leave program
- SDI 1.3% (no wage cap)
- Annual report
- Statement of Information, yearly, $25
2026 figures, each explained with its source on the area’s page. On top of the federal baseline.
Setup, in order
Qualify with the Secretary of State
Before doing business in California — typically the first California hire or officeFile a Statement and Designation by Foreign Corporation ($100) with a Delaware certificate of good standing on bizfile Online, then a Statement of Information ($25) within 90 days.
Open an EDD employer account
Within 15 days of paying more than $100 in wages in a calendar quarterRegister for an employer payroll tax account with EDD; one account covers UI, ETT, SDI and state income tax withholding.
Report new hires
Within 20 days of each start-of-work dateReport each new or rehired employee to the New Employee Registry on Form DE 34.
Buy workers’ compensation coverage
Before the first employee startsWorkers’ compensation insurance is required for every California employee, through a licensed carrier or approved self-insurance.
Set up CalSavers and notices
With the first California employeeOffer a qualified retirement plan or register for CalSavers; post the required notices and give each new hire the Labor Code 2810.5 wage notice.
Start filing with the FTB
15th day of the 4th month after the first California tax yearOpen the FTB account by filing Form 100 for the first year; the $800 minimum tax applies from the second taxable year, paid with the first estimate.
Register with CDTFA
Before the first taxable sale; for SaaS sellers with nexus, before Jan 1, 2027Register for a seller’s permit or a Certificate of Registration — Use Tax with CDTFA if you have California nexus and taxable sales, including SaaS from January 1, 2027.
Register locally
When an employee or office is in the cityRegister with the city where employees work: San Francisco, Los Angeles, Oakland, San Jose and most others require an annual business registration.
The six areas
- AccountingAccounting and state tax in CaliforniaCalifornia taxes corporations at 8.84% with an $800 minimum franchise tax, apportions by a single sales factor with market sourcing, and does not follow federal Section 174 amortization or bonus depreciation.Corporate tax rate8.84%
- ReceivablesReceivables and sales tax in CaliforniaCalifornia’s 7.25% sales tax doesn’t reach SaaS today, but SB 122 makes prewritten SaaS taxable from January 1, 2027; out-of-state sellers register once California sales pass $500,000.Statewide rate7.25%
- PayablesPayables and contractors in CaliforniaCalifornia classifies workers under the ABC test, wants contractors reported to EDD on Form DE 542, and requires 7% withholding on California-source payments to nonresidents over $1,500.Contractor testABC test
- PayrollPayroll taxes and employer rules in CaliforniaCalifornia payroll runs through one EDD account — UI at 3.4% for new employers, ETT, and 1.3% SDI with no wage cap — under a $16.90 minimum wage, daily overtime and same-day final pay.Minimum wage$16.90 an hour
- ComplianceCompliance and filings in CaliforniaA Delaware corporation qualifies with the Secretary of State for $100, files a $25 Statement of Information every year, and owes the FTB at least $800 a year from its second year.Foreign qualification$100
- AdvisoryAdvisory: credits and decisions in CaliforniaCalifornia has a 15% research credit that never expires but is not refundable, does not follow federal QSBS, and caps business credits at $5 million a year through 2029.R&D credit15%
Who you register with
- Franchise Tax Board (FTB)Corporation franchise tax (Form 100), the $800 minimum tax and nonresident withholding
- Employment Development Department (EDD)Payroll tax account (UI, ETT, SDI, withholding), new-hire and contractor reporting
- California Department of Tax and Fee Administration (CDTFA)Seller’s permit, sales and use tax, and the 2027 digital products tax
- California Secretary of StateForeign qualification and the annual Statement of Information
- Department of Industrial Relations — Labor Commissioner’s OfficeMinimum wage, overtime, final pay, paid sick leave and pay transparency
- State Controller’s Office — Unclaimed Property DivisionAnnual unclaimed property Notice Report and Remit Report
Hiring across the border
An employee who lives in one state and works in another is the most common way a startup ends up registered in two. These are California’s neighbors.
Common questions
Does a Delaware C-corp that just qualified in California owe the $800 minimum?
Not in its first taxable year, if it newly incorporated or qualified in California: the FTB exempts that year from the minimum tax. It still owes 8.84% on any California income that year. From the second year on, the $800 minimum is due even at a loss, and it is paid with the first Form 100-ES installment on the 15th day of the 4th month.
Is SaaS taxable in California?
Not yet. Through 2026, remotely accessed prewritten software is outside California sales tax. SB 122, signed June 29, 2026, changes that on January 1, 2027: prewritten software transferred electronically or accessed remotely, which CDTFA says includes SaaS, becomes taxable. Custom software, “digital infrastructure” such as cloud platforms customers build on, and products used solely outside California are excluded.
Do we report contractors to California?
Through EDD, separately from the 1099. Within 20 days of paying an individual contractor $600, or signing a contract for $600 or more, you file Form DE 542 with EDD. California’s threshold stayed at $600 even though the federal 1099-NEC threshold rises to $2,000 for 2026.
When is the final paycheck due in California?
On the spot. An employee who is let go must be paid all wages, including accrued vacation, immediately at the time of termination. One who quits with at least 72 hours’ notice is paid on their last day; without notice, within 72 hours. Paying late triggers “waiting time” penalties under Labor Code section 203, which accrue as a day’s wages for each day the pay is late, so final pay is usually cut as a manual check on the last day.
Do we have to register a Delaware company in California?
If it is doing business in California, yes, and the FTB applies its own test regardless of whether you registered. Qualifying with the Secretary of State is a $100 filing. A corporation that transacts business in California without qualifying still owes FTB tax, can be penalized, and can’t bring a lawsuit in a California court until it qualifies.
Does California honor the federal QSBS exclusion?
No. California follows neither Section 1202 nor Section 1045, so a founder or employee who lives in California when they sell qualified small business stock pays California tax on the whole gain, at personal rates up to 12.3% plus the 1% Behavioral Health Services Tax on income over $1 million, even if the gain is excluded federally.
Sources
Checked against each agency’s own page on . Rates and thresholds change, usually on January 1.
- FTB — Corporations
- FTB — 2025 Form 100 Corporation Tax Booklet
- FTB — Due dates: businesses
- FTB — 2025 Instructions for Form 100-ES
- FTB — Doing business in California
- FTB — California conformity to federal law
- FTB — Net operating loss
- FTB — What’s new with tax forms (SB 122, SB 711)
- FTB — California research credit
- FTB — 2025 Instructions for Form FTB 3523, Research Credit
- FTB — Tax News, December 2025
- FTB — Summary of federal income tax changes
- FTB — 2025 Form 540 Personal Income Tax Booklet
- FTB — Withholding on nonresidents
- FTB — 2026 Instructions for Form 592
- FTB — Guidance for reporting information returns
- CDTFA — Tax guide for out-of-state retailers (AB 147)
- CDTFA — California city and county sales and use tax rates
- CDTFA — Special Notice L-1036, Sales and Use Tax Applies to Digital Products Beginning January 1, 2027
- CDTFA — Tax Guide for Retailers and Purchasers of Digital Products
- CDTFA — Regulation 1502, Computers, Programs, and Data Processing
- CDTFA — Qualified Purchaser Program FAQs
- EDD — Tax rates, wage limits, and value of meals and lodging
- EDD — Step 1: Register as an employer
- EDD — New hire reporting
- EDD — Independent contractor reporting
- EDD — 2026 California Employer’s Guide (DE 44)
- DIR — Release 2025-118, minimum wage increases to $16.90 on January 1, 2026
- DIR Labor Commissioner — Paydays, pay periods, and the final wages
- DIR Labor Commissioner — Overtime FAQ
- DIR Labor Commissioner — California paid sick leave FAQ
- DIR Labor Commissioner — California Equal Pay Act and pay transparency FAQ
- DIR Division of Workers’ Compensation — Employer information
- California Labor & Workforce Development Agency — ABC test
- San Francisco OLSE — Historical minimum wage rates (2026)
- City of Los Angeles Office of Wage Standards — 2026 minimum wage increase memo
- San Francisco Treasurer & Tax Collector — Proposition M (2024) business tax reform
- CalSavers — Frequently asked questions
- California Secretary of State — Business entities FAQs
- California Secretary of State — Statement and Designation by Foreign Corporation
- State Controller’s Office — How to report unclaimed property
- IRS — FUTA credit reduction
General information for US companies, not tax, legal or accounting advice for yours. Rules and thresholds change; confirm the specifics with a CPA or the agency before you act on them.