Cannabis Industry Payroll Tax Reporting

The Employment Development Department (EDD) is here to help business owners in the cannabis industry 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.

Who is an Employee?

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.
  • 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.

For more information, refer to the following:

Wages

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 include, but are not limited to:

  • Salaries, hourly pay, piece rate, or payments by the job.
  • Commissions and bonuses.
  • Overtime and vacation pay.
  • The reasonable cash value of compensation other than cash.

Wages are subject to all employment (payroll) taxes and reportable as Personal Income Tax (PIT) wages unless otherwise stated.

For more information, refer to the following:

Register as an Employer

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 in a calendar quarter. Once subject, an employer must register with the EDD within 15 days.

Withhold, Report, and Pay

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

Note: 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 Employment Tax Office to make the appropriate arrangements with an EDD representative.

E-file and E-pay Mandate

All employers are required to electronically submit employment tax returns, wage reports, and payroll tax deposits to the Employment Development Department.

File and Pay Online with e-Services for Business

e-Services for Business is your fast, easy, and secure way to manage your employer payroll tax account online 24 hours a day, 7 days a week.

Additional Resources

For further assistance, contact the Taxpayer Assistance Center at 1-888-745-3886 or visit your local Employment Tax Office.