by Zach Javdan
November 16, 2023
California levies an annual gross receipts tax on LLCs operating in the state based on their total gross receipts. This tax 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
- Based on Total Gross Receipts: Tax levied annually on LLC gross receipts from CA sources.
- Graduated Tax Rates: Rates range from $800 to $11,790 depending on gross receipt amounts.
- Excludes Investment Income: Generally excludes receipts from passive investments like dividends, interest, royalties.
- Applies to In-State and Out-of-State LLCs: This tax applies to all LLCs operating in CA, regardless of where organized.
- Tax Basis is Gross Receipts: Tax does not account for deductions, expenses, losses.
How Tax is Calculated
- Graduated Tax Brackets: Brackets based on total gross receipts from CA sources.
- Receipts Include: Sales, services, rents, royalties, interest, dividends (some exceptions).
- Apportionment for Multistate LLCs: Only CA portion of receipts included based on apportionment rules.
- Annual Tax Return: Filed using Form 109; due 15th day of 4th month after tax year end.
- First Year Requirements: Prorated for short tax years; $800 minimum tax still applies.
- Interest and Penalties: Apply to unpaid taxes after due date; up to 12% penalties.
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 tax.
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