FAQs – Cannabis Industry Payroll Tax Reporting
Any business (nonprofit or for-profit, medical, or recreational), licensed or not with the Bureau of Medical Cannabis Regulation, that engages employees, is subject to payroll taxes.
An individual worker is an employee when hired by an employer to perform services, and either: the worker is an employee by a statute (statutory employee), or the employer has the right to control the manner and means by which the worker performs his/her services (common law employee).
For more information:
Generally, a business becomes subject to state payroll taxes upon paying wages over $100 in a calendar quarter to one or more employees. Once subject, an employer must register with the EDD within 15 days of becoming a subject employer. For more information, visit Am I Required to Register as an Employer.
For more information about wages, subject wages, and Personal Income Tax (PIT) wages, refer to the following:
All wages must be reported to the EDD. Wages are all compensation for an employee’s personal services, whether paid by payroll check, personal check, cash, noncash payments (i.e., meals and/or lodging), and tips.
Reportable wages include:
California has four state payroll taxes which are administered by the EDD.
Typically, a commercial type employer reports their payroll taxes on a Quarterly Contribution Return and Report of Wages (DE 9) and Quarterly Contribution Return and Report of Wages (Continuation) (DE 9C).
For more information, visit Required Filings and Due Dates.
Effective January 1, 2017, employers with 10 or more employees are required to electronically submit employment tax returns, wage reports, and payroll tax deposits to the EDD. All remaining employers will be subject to this requirement beginning January 1, 2018. For more information, visit E-file and E-pay Mandate for Employers.
Employers that are unable to electronically file and pay may submit an E-file and E-pay Mandate Waiver Request (DE 1245W).
e-Services for Business is a fast, easy, and secure way to meet this requirement and manage your employer payroll tax account online. Use e-Services for Business to register, file, and pay. For more information, visit e-Services for Business.
If your cannabis business is unable to establish a checking account, you are still required to remit payroll taxes. Contact your local Employment Tax Office to make the appropriate arrangements with an EDD representative.
Submit California payroll taxes at least quarterly, or sooner, if required based upon the accumulated amount of Personal Income Tax (PIT) withholding of your deposit. Learn more about your payroll filing responsibilities at Required Filings and Due Dates.
Records to keep include, but not limited to: time cards, records of payments/payroll records (payroll check, personal check, cash, cannabis, meals, and tips), and other information necessary to determine payments issued to employees. Employers are required to keep payroll records for a minimum of four years.
Records must include the following information for each worker:
- Full name (first name, middle initial, and last name)
- Social Security number
- Date hired, rehired, or returned to work after a temporary layoff.
- Last date services were performed.
- Place of work.
- Monies paid:
- Dates and amounts of payment.
- Pay period covered.
- Cash or cash value of in-kind wages (such as meals, lodging, bonuses, gifts, and prizes) showing the nature of the payment, the period that the services were performed, and the type of special payment made.
- The amounts withheld from employee wages.
- Disbursement records showing payments to workers.
- Other information necessary to determine payments to workers.
For additional information, refer to the California Employer’s Guide (DE 44).
- Can cannabis workers file for Unemployment Insurance (UI) and/or State Disability Insurance (SDI) benefits?
Yes. Cannabis workers must meet all UI and/or SDI eligibility requirements in order to receive benefits.
The UI program pays benefits to workers who have lost their job and meet the program’s eligibility requirements. For an overview of the UI program, visit Unemployment Insurance.
The SDI program includes both Disability Insurance (DI) and Paid Family Leave (PFL), which provide short-term benefits to eligible workers who have a full or partial loss of wages due to a non-work-related illness, injury, or pregnancy. For an overview of the SDI program, visit Disability Insurance and Paid Family Leave.
- Bureau of Medical Cannabis Regulation
Distribution, transportation, laboratory testing, and dispensary (sale) licenses.
- Medical Cannabis Cultivation Program
Licensing information for cultivators or growers.
- California Department of Industrial Relations and US Department of Labor
Record keeping, minimum wage requirements, overtime wage requirements, and worker safety requirements.
- Internal Revenue Service
Payroll reporting requirements (including obtaining a federal employer identification number and federal income tax return requirements.
- Franchise Tax Board
State income tax return requirements.
- Board of Equalization
Sales and use tax requirements.
- County governments for property tax requirements
- City or county police departments about city or county laws