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New cannabis businesses must participate in payroll tax reporting

December 28, 2017

 

With new changes in laws and an increase in hiring in the cannabis industry, the California Employment Development Department is making sure business owners in the cannabis industry know how to comply with California’s payroll tax laws and avoid unforeseen tax liabilities. California businesses that hire employees to perform services are required by law to withhold, report, and pay payroll taxes to the EDD.

 

Cannabis businesses include, but are not limited to, distributors, transporters, and dispensaries and would include employees, such as, managers, plant caretakers, budtenders, security guards, salespersons, and delivery persons.

 

As defined in the California Unemployment Insurance Code, an employee includes any officer of a corporation, any worker who is an employee under the usual common law rules, and any worker whose services are specifically covered by law.

 

An employee may perform services on a less than full-time or temporary basis. The law does not exclude services from employment which are commonly referred to as day labor, part-time help, casual labor, temporary help, probationary, or outside labor. Information Sheet: Employment (DE 231)

 

Wages are all compensation for an employee’s personal services, whether paid by check or cash, or the reasonable cash value of noncash payments. Wages can include salaries, hourly pay, piece rate, or payments by the job. Commissions, bonuses, vacation pay, and overtime are also considered part of an employee’s wages. The reasonable cash value of compensation other than cash can also count as an employee’s wages.

 

Regardless of the form, wages are subject to all employment (payroll) taxes and reportable as Personal Income Tax (PIT) wages unless otherwise stated. What Are Wages?

 

If you operate a business and employ one or more employees, you must register as an employer with the EDD when you pay wages in excess of 100 dollars in a calendar quarter. Once subject, an employer must register with the EDD within 15 days. Am I Required to Register as An Employer?

 

California businesses that hire employees to perform services are required by law to withhold, report, and pay payroll taxes to the EDD. Reporting Requirements

 

If a cannabis business is unable to obtain a checking account, the business is still required to remit payroll taxes and should contact the local