On: January 3, 2020
With owning a business comes employees, meaning that you’ll need to know what to do with cannabis payroll taxes. All businesses, whether they are a nonprofit or for-profit, medical, or recreational, licensed by the Bureau of Medical Cannabis Regulation, that have or use employees, are subject to payroll taxes. Cannabis payroll taxes are taxes paid by employees and employers through the payroll process. What do I need to know about cannabis payroll taxes In California, the standard tax is currently 0.9 percent. California Personal Income Tax is the other California payroll tax that’s paid by employees rather than employers, but employers are again responsible for withholding it from their paychecks. In the United States, there are both federal and state payroll taxes. California has four state payroll taxes, all of which are given out by the Employment Development Department (EDD). These taxes are 1) unemployment insurance (UI) tax, 2) employment training tax (ETT), 3) state disability insurance (SDI) tax, and 4) California personal income tax (PIT). Cannabis businesses are still at the end of the day businesses and must report all their payroll taxes to the state. Cannabis payroll taxes are pretty standard compared to other businesses. Employers may withhold tax from the employee’s salary and pay it to the government on their behalf, or contribute a certain amount that is decided by the employee’s wages. The employee’s wage or salary will ultimately determine the amount of payroll tax. When it comes to making sure that you are doing all of your cannabis payroll tax duties if you are an employer, it’s important to note that every California employer must report any information about their new employees to the California New Employee Registry within 20 days of their first day of work. This reporting is crucial to the entire system and is not something any small business wants to skip. How do I report cannabis payroll taxes? In California, you would report your payroll taxes electronically to the Employment Development Department through the Quarterly Contribution Return and Report of Wages (DE 9) and Quarterly Contribution Return and Report of Wages (Continuation) (DE 9C), which can be found on their website. Employers with 10 or more employees are required to electronically submit employment tax returns, wage reports, and payroll tax deposits to the EDD during the correct time. This quarterly system means that four times a year you will submit all the proper and necessary taxes to the EDD in order to successfully operate. When you are reporting, it is important to report all wages that are given out to employees. Wages are all compensation for an employee’s personal services, whether they are paid by payroll check, personal check, cash, noncash payments (i.e., meals and/or lodging), and tips. It is also important to keep records of all payroll related items such as time cards, records of payments/payroll records (payroll check, personal check, cash, cannabis, meals, and tips), and any other information that is necessary. It is important to note that employers are required to keep payroll records for a minimum of four years. Always make sure to call
Leading Tax Group and don’t attempt to do it yourself.
800-900-4250
