Client just received a FTB Notice RE: Withhold at Source Requirement. Client is a technology CA S-Corp LLC, with Employees in 6 different states. The out-of-CA employees are never in CA, operating as either sales or tech development services, and their wages are reported to their residence state. The Corp is registered in each of the states with employees and/or sales reporting requirements. There are no corporate assets in any state, including CA. (It’s all tech programming.)
Is the Corp required to withhold the indicated 7% CA Withholding for these employees? Would each non-CA employee qualify to file a Form 590, with the Corporation Exemption box checked? TIA. Happy Friday!