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CA Nonresident Income Tax Withholding

December 29, 2016 • Ben L. • Log In to Post Comments

I am unclear on how the CA Economic Nexus rule applies to CA nonresident withholding. Economic nexus rules says income is sourced to CA if customer is in CA while below says otherwise. Any feedback? Does the economic nexus rule not apply to CA nonresident individuals? 


CA FTB Pub. 1017 page 6 states:

"Income Subject to Withholding 17. What types of payments are subject to withholding? The following California source income is subject to withholding: • Payments made for personal services performed in California. Where the nonresident lives, the location where the contract for services is entered into, or the place of payment does not determine the source of income from personal services. The location where the personal services are performed determines the source of income."




We have asked the FTB about this and they have not responded. We are taking the position that, although the income is likely taxable under market based sourcing rules, it is not subject to withholding.


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