Example 1: Withholding agents may send their payees an exemption certificate, on FTB Form 590, Withholding Exemption Certificate, or any successor form designated by the Franchise Tax Board on its website at www.ftb.ca.gov ("FTB Form 590"). The required information specified in FTB Form 590 is set forth in subsection (h), below. Payees may use this form to certify their residency status, provided that the withholding agent may only rely upon an exemption certificate, on FTB Form 590, if payees include their taxpayer identification number.
Example 2: Withholding agents may rely on a California street address as an indication of a payee's residency status. If the payee has a California street address, no withholding is required. An exemption certificate, on FTB Form 590, may be used to verify residency status. A valid California street address does not include a California post office box, or an "in care of" address. If a change of address occurs, the withholding agent must reevaluate the payee's residency status.
If a non-California business entity payee is doing business in California within the meaning of Revenue and Taxation Code section 23101 and is receiving California source income, withholding is required unless the payee qualifies under the requirements of the exemption certificate, on FTB Form 590, or the amount is excluded from amounts subject to withholding.
If a corporate payee has not qualified with the Office of the California Secretary of State (SOS) and does not have a permanent place of business in this State, but is a member of a combined report filed under Regulation section 25106.5 and included in a group return filed pursuant to that regulation, then the key corporation is treated as a guarantor and surety for the other members, so that the corporate payee is deemed to be a California Business Entity.
The following are examples of methods the Franchise Tax Board will consider reasonable for withholding agents to rely upon in determining if a corporation has a permanent place of business in California or is qualified to do business in this State for purposes of the withholding regulations (Regulation sections 18662-0 through 18662-8):
Example 1: Withholding agents may rely on a completed exemption certificate, on FTB Form 590. A completed exemption certificate, on FTB Form 590, showing the payee's taxpayer identification number and stating that the corporation has a permanent place of business in California (or is included in a combined return with a California key corporation) protects the withholding agent from penalties for failure to withhold, unless the withholding agent has actual knowledge that the statement in the exemption certificate, on FTB Form 590, is false.
Example 2: If a corporation is incorporated in California or qualified to do business in California with the SOS, it is a California business entity for withholding purposes. Withholding agents can determine if a corporate payee is a California corporation or qualified to do business in this State by contacting the SOS. Withholding agents may rely on a printout from the SOS's website showing the payee's entity number, that the corporation has a permanent place of business in California (e.g., the "jurisdiction" field shows "California" or the "entity city, state, zip" field shows "CA" for the state), and that the corporation is in good standing (e.g., the "status" field shows "active"). The SOS website printout-- which must be printed within 30 days prior to making a payment-- protects the withholding agent from penalties for failure to withhold, unless the withholding agent has actual knowledge that the information received from the SOS is false.
Cal. Code Regs. Tit. 18, § 18662-4
2. Renumbering of Section 18662(f) to Section 18662(d) filed 4-9-81; designated effective 6-30-81 (Register 81, No. 15).
3. Renumbering and amendment of Section 18662(d) to Section 18662-4 filed 8-19-82; effective thirtieth day thereafter (Register 82, No. 34).
4. Editorial correction (Register 83, No. 19).
5. Change without regulatory effect renumbering and amending former section 18805-4 to section 18662-4 filed 11-23-98 pursuant to section 100, title 1, California Code of Regulations (Register 98, No. 48).
6. Repealer and new section heading and section and amendment of NOTE filed 3-10-2014; operative 7-1-2014 (Register 2014, No. 11).
7. Change without regulatory effect amending subsections (a)(3), (e)(1), (h)(2), (h)(3)(C), (h)(4), (i)(3)-(4), (i)(14)-(16), (j)(5), (j)(18)-(20), (k)(1)-(4), (k)(6), (l)(1)-(2) and (l)(10)-(11) filed 12-9-2014 pursuant to section 100, title 1, California Code of Regulations (Register 2014, No. 50).
8. Amendment filed 10-8-2019; operative 10-8-2019 pursuant to Government Code section 11343.4(b)(3) (Register 2019, No. 41).
Note: Authority cited: Section 19503, Revenue and Taxation Code. Reference: Sections 18662 and 18817, Revenue and Taxation Code.
2. Renumbering of Section 18662(f) to Section 18662(d) filed 4-9-81; designated effective 6-30-81 (Register 81, No. 15).
3. Renumbering and amendment of Section 18662(d) to Section 18662-4 filed 8-19-82; effective thirtieth day thereafter (Register 82, No. 34).
4. Editorial correction (Register 83, No. 19).
5. Change without regulatory effect renumbering and amending former section 18805-4 to section 18662-4 filed 11-23-98 pursuant to section 100, title 1, California Code of Regulations (Register 98, No. 48).
6. Repealer and new section heading and section and amendment of Note filed 3-10-2014; operative 7-1-2014 (Register 2014, No. 11).
7. Change without regulatory effect amending subsections (a)(3), (e)(1), (h)(2), (h)(3)(C), (h)(4), (i)(3)-(4), (i)(14)-(16), (j)(5), (j)(18)-(20), (k)(1)-(4), (k)(6), (l)(1)-(2) and (l)(10)-(11) filed 12-9-2014 pursuant to section 100, title 1, California Code of Regulations (Register 2014, No. 50).
8. Amendment filed 10-8-2019; operative 10/8/2019 pursuant to Government Code section 11343.4(b)(3) (Register 2019, No. 41).