• Free for qualified executives and consultants to industry

  • Receive quarterly issues of Area Development Magazine and special market report and directory issues


California Basic Business Taxes 2012

California's economic development, finance and tax organizations provide a range of incentive programs to initiate new business and commercial investment. Specific programs include single sales factor taxes, property taxes, and sales and use taxes.

(page 3 of 3)
Workers' Compensation Insurance
California's workers' compensation system is overseen by the Department of Industrial Relations and the Department of Insurance. In 2005, SB899 was signed into law. This landmark reform legislation that overhauled the workers' compensation system and required independent medical reviews, established employer-selected doctor networks and imposed uniform standards. As a result, insurance capital has flowed into the state and new insurers have entered the market. According to the Department of Insurance, base rates have fallen over 35% since January 2004.

Overview of California Tax System
Tax Base or Measure Rate Administering Agency
Corporate Income or Bank and Corpoation Franchise Tax Combined net income apportioned to california 8.84% Franchise Tax Board
Sales and Use Taxes Receipts from sales or lease of taxable items 7.25-9.25% Board of Equalization
Property Tax 100% of assessed valuation Avg. 1.1% Board of Equalization
Personal Income Tax Taxable personal income 1.25-10.55% Franchise Tax Board
Unemployment Insurance Tax (aka Payroll Tax) First $7,000 of wages per employee per year 1.5-6.2% Employment Development Department
Disability Insurance (employee paid) Taxable wage limit for withholding of $90,669 1.2% Employment Development Department
Finished Goods, Raw Materials, and Inventory Tax none none none
Workers' Compensation Insurance per $100 of payroll Varies based on job classification, workplace, safety record, and insurance carrier. Department of Insurance, Department of Industrial Relations

Overview of Payroll Tax System:

Unemployment Insurance Employment Training Tax (ETT) State Disability
Insurance (SDI)
California Personal Income Tax (PIT)
Who Pays Employer Employer Employee (employer withoholds from employees wages) Employee (employer withholds from employees wages)
Taxable Wages First $7,000 of subject wages per employee per year First $7000 of subject wages per employee, per year First $93,316 of subject wages, per employee per year No limit
Tax Rate New Employer tax rate is 3.4 percent(.034) for up to three years. Following this period Set by statute at
0.1 percent
(.001) of UI
taxable wages
for employers
with positive
UI reserve
balances and
subject to
CUIC Section
The 2011 SDI
tax rate is 1.2
percent (.012)
(this includes
the rate for DI
and PFL) of
SDI taxable
wages per
employee, per
year. The SDI
taxable wages
and tax rate are
set by the
California State
and may
change each
Withheld based on employee's Form W-4 or DE 4
Minimum Tax

(Except if
employer is
subject under
CUIC Section
$434 per
employee, per
year. (The
amount has been
calculated at the
highest UI tax
rate of 6.2
percent [$7000 x
$7 per
employee, per
year ($7,000 x
$1119.79 per
employee, per
year ($93,316 x
No maximum

Permit Process
California can readily accommodate expansion and location projects with properly-zoned, infrastructure-rich industrial and commercial sites. Many communities have also adopted state-ofthe-art permit streamlining practices, which enable them to efficiently meet a company's project timeline. A number of counties have established Business Environmental Resource Centers that act as one-stop, non-regulatory offices set up to help businesses understand and comply with air quality, hazardous materials/waste, solid waste and water quality regulations. They act as neutral third-party mediators and their services are free and confidential. These communities will assign a project manager to personally guide an applicant through the permit process.

Overview of Permit Procedure
There are four elements generally required to initiate the permit process. The following is a summary of the steps that a project may follow to become fully permitted in California.
1. An adequate description of the proposed project.
2. A completed application form of usually less than four pages.
3. The appropriate filing fee as determined by the local, state, or federal permitting authority.
4. California law requires development projects to be reviewed for any potential effects on the environment. Impacts on air and water quality, traffic, housing, and land use are generally considered. If there is a significant effect on resources, then further documentation may be required.

The permit process starts at the local level in the planning department. Local permits called "land use" permits are generally required to ensure that a proposed project or business is located in the appropriate region of the city that has been identified for similar use.

These regions, called "zones," are identified in the city or county's general plan, and represent what the local government (on behalf of the citizens of that community) requires of the business to operate in a particular zone. Land use permits ensure that the proposed project use is consistent with the general plan and verify that the proposed project conforms to the overall plan for the local community.

When a proposed business first initiates the permitting process with the local authorities, it automatically begins an environmental review process. This is in the form of an Initial Study, which checks whether or not the project may have an effect (for example, increased demand) on such factors as water supply (yes, no or maybe). Any "yes" and "maybe" impacts may need to be mitigated, depending on the local environmental and political climate. A significant number of "yes" answers may inspire the lead agency (which is in charge of coordinating all permits), to require an Environmental Impact Report (EIR).

The Permit Streamlining Act places lead agencies on strict timelines in which to issue all necessary permits.

Incentive and tax information is provided to Area Development by each state's economic development or commerce agency for information purposes only and is subject to revision at any time by the state government. Please contact the state agency directly for full requirements and offerings.