Zach Javdan Last reviewed July 2026 by LawInc attorneys.
California levies an annual fee on LLCs operating in the state — commonly called the gross receipts tax on LLCs, and officially the LLC fee — based on their total income from California sources. This fee is in addition to the $800 minimum franchise tax. Understanding how the gross receipts tax works is crucial for California LLCs.
Overview of Gross Receipts Tax
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- Based on Total California Income: Fee levied annually on the LLC’s “total income from all sources derived from or attributable to California” — generally gross income plus cost of goods sold.
- Graduated Fee Tiers: The fee ranges from $900 to $11,790 depending on total California income — separate from, and in addition to, the $800 annual franchise tax.
- No Double Counting: Income already subject to the fee in another LLC (for example, allocated up a tiered LLC structure) is generally excluded so the same dollars are not charged twice.
- Applies to In-State and Out-of-State LLCs: This fee applies to all LLCs operating in CA, regardless of where organized.
- Gross, Not Net: The fee does not account for deductions, expenses, or losses — an LLC can owe it even in an unprofitable year.
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- How does the fee impact profitable vs unprofitable LLCs? The fee is based only on total California income, not profitability.
- Can tax credits and deductions reduce liability? No, the fee determination does not consider credits or deductions.
- Are LLCs in other states subject to this tax? No, only LLCs operating in CA are subject to the fee.
How Tax is Calculated
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- Graduated Fee Tiers: Tiers based on total income from California sources.
- Income Included: Generally gross income plus cost of goods sold — sales, services, rents, and other business income attributable to California, with limited statutory exclusions.
- Apportionment for Multistate LLCs: Only the CA portion of total income is included based on apportionment rules.
| Total California Income | Annual Fee |
|---|---|
| $250,000 – $499,999 | $900 |
| $500,000 – $999,999 | $2,500 |
| $1,000,000 – $4,999,999 | $6,000 |
| $5,000,000 or more | $11,790 |
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- How to determine CA portion of total income? Follow CA apportionment rules based on sales source.
- How to classify out-of-state receipts? Classify based on apportionment principles.
- Is the fee based on gross profits or total income? The fee is based solely on total income from California sources — not profits.
Reporting Requirements
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- Estimated Fee (Form FTB 3536): The LLC fee is estimated and paid by the 15th day of the 6th month of the tax year — June 15 for calendar-year LLCs.
- Annual $800 Tax (Form FTB 3522): The separate $800 annual franchise tax is paid by the 15th day of the 4th month of the tax year — April 15 for calendar-year LLCs.
- Annual Return (Form 568): The LLC’s return reconciles the fee. Due the 15th day of the 3rd month after year end for LLCs taxed as partnerships (March 15 for calendar-year LLCs), or the 15th day of the 4th month for single-member LLCs owned by individuals.
- First Year Requirements: Prorated for short tax years; $800 minimum tax still applies.
- Interest and Penalties: A 10% underpayment penalty applies if the estimated fee paid by the June deadline is less than the fee actually due; interest and additional penalties can apply to late payments.
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- When is Form 568 due? The 15th day of the 3rd month after the tax year closes for partnership-taxed LLCs; the 15th day of the 4th month for single-member LLCs owned by individuals.
- What if estimated fee payments were made? The Form 3536 estimated fee payment is applied against the fee due with Form 568.
- What is the minimum franchise tax? $800 minimum franchise tax applies separately (paid with Form 3522).
Licensed Professional? An LLC Is Usually the Wrong Entity
California licensed professionals — physicians, lawyers, psychologists, dentists, accountants, and most other licensees — generally cannot use a standard LLC to provide professional services in California. The usual vehicle is a California professional corporation, which is taxed differently and does not pay the LLC fee. If you are comparing structures, our S corp tax savings calculator shows how the corporate side of the math works.
Understand Your LLC Tax Responsibilities
Stay compliant with California’s gross receipts tax requirements if you own a California LLC. Contact the FTB, and your California CPA, with any questions on calculating, reporting, and paying this fee.
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