CA Tells Franchisees to Withhold 7% from Franchisor Royalties

The California Franchise Tax Board recently told California franchisees to begin withholding 7% of all lease and royalty payments to out-of-state franchisors that exceed $1,500 per calendar year.

19 minute read October 28, 2009 at 01:51 PM

Dirk Giseburt, Rochelle Spandorf And Jaymee Castrillo

CA Tells Franchisees to Withhold 7% from Franchisor Royalties

On the heels of the New York State Department of Taxation and Finance's recent move to require annual information returns from franchisors to help the state catch New York franchisees who underreport sales taxes, the California Franchise Tax Board (the “FTB”) recently told California franchisees to begin withholding 7% of all lease and royalty payments to out-of-state franchisors (“Nonresident Franchisors”) that exceed $1,500 per calendar year.

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