California Corporate Tax Rate: What You Need To Know For 2023
Understanding California Corporate Tax Rates
The state of California imposes a corporate income tax on all corporations registered in the state. This tax is calculated as a percentage of the company’s gross income, which is reported to the state’s Franchise Tax Board (FTB) on an annual basis. The current corporate tax rate in California is 8.84 percent, though the actual rate may be adjusted depending on the type of business and other factors.
The corporate tax rate in California is the same regardless of whether a business is an S corporation or a C corporation, but the way the taxes are calculated may be different. In addition, the rate may vary depending on the type of business and any existing tax credits or deductions. In general, the corporate tax rate in California is higher than the federal tax rate, which is currently set at 21 percent.
Who Has to Pay California Corporate Tax?
Any business that is incorporated in California or does business in California must pay the corporate income tax. This includes both domestic and foreign corporations, as well as LLCs, LLPs, and other entities. If a business meets the definition of a corporation according to the California Franchise Tax Board, then it must pay the corporate income tax.
In addition to the corporate income tax, businesses may also be subject to other taxes such as the Sales and Use Tax, the Employment Training Tax, and the Bank and Corporation Franchise Tax. Depending on what type of business is being operated, there may be other taxes and fees that are applicable.
When Is the California Corporate Tax Due?
The due date for filing the corporate income tax return in California is the 15th day of the fourth month after the end of the tax year. For calendar year filers, this means the due date is April 15th. If the 15th falls on a weekend or holiday, the due date is extended to the next business day.
In addition to the tax return, businesses must also pay the corporate income tax on or before the due date. The payment must be made in US dollars, either by check or money order. Payments can also be made online through the FTB’s website.
What Are Some Common Exemptions to the California Corporate Tax?
There are several exemptions to the California corporate income tax, including the Small Business Exemption and the Limited Liability Company Exemption. The Small Business Exemption applies to businesses with gross receipts of less than $1 million in the prior tax year. The Limited Liability Company Exemption applies to LLCs that have elected to be taxed as a corporation.
In addition, certain types of businesses may be eligible for reduced tax rates or credits. These include non-profit organizations, agricultural businesses, and businesses that meet certain criteria for research and development. To determine if a business is eligible for any of these exemptions, it is best to consult a tax professional.
What Are the Penalties for Not Paying the California Corporate Tax?
The penalties for not paying the California corporate income tax can be severe. Businesses that fail to file a return or pay the tax on time may be subject to late filing and late payment penalties. In addition, businesses that deliberately evade the tax may be subject to criminal prosecution.
The FTB also has the authority to issue liens and levies against businesses that fail to pay the corporate income tax. This can have a major impact on a business’s credit rating and ability to obtain financing. For these reasons, it is important for businesses to comply with California’s corporate tax laws.
Conclusion
The corporate tax rate in California is 8.84 percent, and it applies to all businesses that are incorporated in the state or do business in the state. The due date for filing the tax return and paying the tax is April 15th, and businesses that fail to comply may be subject to severe penalties. There are several exemptions to the corporate income tax, and businesses should consult a tax professional to determine if they are eligible for any of these.