What Type of Tax Does the EDD Collect?

On: June 22, 2018

California has four state payroll taxes which are administered by the Employment Development Department (EDD).

• Unemployment Insurance (UI) and Employment Training Tax (ETT), which are employer contributions.
• State Disability Insurance (SDI) and Personal Income Tax (PIT), which are withheld from employees’ wages.

Wages are generally subject to all four payroll taxes. However, some types of employment are not subject to payroll taxes and/or PIT withholding.

• Unemployment Insurance (UI) Tax

The UI program is part of a national program administered by the U.S. Department of Labor under the Social Security Act. The UI program provides temporary payments to individuals who are unemployed through no fault of their own.

• UI is paid by the employer.

Employment Training Tax (ETT)

The ETT provides funds to train employees in targeted industries to improve the competitiveness of California businesses. The ETT funds promote a healthy labor market and helps California businesses invest in a skilled and productive workforce and develop the skills of workers who directly produce or deliver goods and services.

• The ETT is an employer-paid tax.

State Disability Insurance (SDI) Tax

The State Disability Insurance (SDI) program provides temporary benefit payments to workers for non-work-related disabilities. SDI tax also provides Paid Family Leave (PFL) benefits. PFL is a component of SDI and extends benefits to individuals unable to work because they need to care for a seriously ill family member or bond with a new child.

• SDI is a deduction from employees’ wages.

California Personal Income Tax (PIT)

California PIT is a tax levied on the income of California residents and on income that nonresidents derive within California. The EDD administers the reporting, collection, and enforcement of PIT wage withholding. The Franchise Tax Board (FTB) and the EDD administer the California PIT program for the Governor to provide resources needed for California public services, such as schools, public parks, roads, health, and human services.

• California PIT is withheld from employees’ pay based on the Employee’s Withholding Allowance Certificate (Form W-4 or DE 4) on file with their employer.