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308e4867
Community Member

CA - Franchise Tax filing requirement??

I was informed by the CA Franchise Tax Board (chat) that participating in the Upwork marketplace is doing business in CA and requires $800 filing requirement, even though I am in Texas.

Is this true?  If not, how can I protect myself from being blindsided by FTB?

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mwiggenhorn
Community Member

It appears that the CA law applies to LLCs, LPs, and LLPs.  If you are not one of these entities, frankly, I wouldn't worry about it.  I would check with the tax authorities and maybe TurboTax and/or a CA tax attorney.  I have many clients in California and this has never come up, but I am just a freelancer and don't have a tax ID (other than my social) or corporation set-up.  "California law generally imposes a minimum franchise tax of $800 on every corporation incorporated, qualified to transact business, or doing business in California.  ETA:  the case cited by Preston is from 2015 and refers to LLCs, so most likely is not on point.  Also, I am not a lawyer and am not giving legal advice here.

 


Albert B wrote:

I was informed by the CA Franchise Tax Board (chat) that participating in the Upwork marketplace is doing business in CA and requires $800 filing requirement, even though I am in Texas.

Is this true?  If not, how can I protect myself from being blindsided by FTB?



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9 REPLIES 9
AndreaG
Moderator
Moderator

Hi Albert,

 

I would suggest you consult with a local tax expert as Upwork cannot give any legal or tax advice.

 

~Andrea
Upwork
308e4867
Community Member

This is a question to the forum, not tax advice.  Is EVERY NON CA RESIDENT who participates in the Upwork marketplace required to file with the FTB as doing business in California?

re: "Is EVERY NON CA RESIDENT who participates in the Upwork marketplace required to file with the FTB as doing business in California?"

 

No.

 

But don't take my word for it. You can read for yourself:

 

https://www.ftb.ca.gov/about-ftb/newsroom/tax-news/december-2020/all-about-business.html

 

https://www.forbes.com/sites/robertwood/2019/10/22/now-california-can-assess-taxes-no-matter-where-y...

 

Also: Just think about this logically: If the state of California actually tried to collect $800/year from every Upwork user, by virtue of the fact that Upwork has headquarters In California, then Upwork would have already moved its headquarters out of the state.

The Forbes article gives an example of a sole proprietor (screenwriter) who isn't a California resident but does  business with clients in California, and he had to pay taxes there. So no, Upwork being located in California isn't a problem because they're not our client, but if you have clients in California, wouldn't you be in the same situation as the screenwriter? Or are American freelancers not considered to be sole proprietors?

I believe that questions have been posed in this thread which are well-meaning and sincere. But the answers should come from local experts and authorities.

 

I don't think that Upwork's users would benefit if Upwork representatives weighed in on this topic.

Thanks for your perspective, Christine!

Regards,

AB

Thanks for your perspective, Preston.

Regards,

AB

mwiggenhorn
Community Member

It appears that the CA law applies to LLCs, LPs, and LLPs.  If you are not one of these entities, frankly, I wouldn't worry about it.  I would check with the tax authorities and maybe TurboTax and/or a CA tax attorney.  I have many clients in California and this has never come up, but I am just a freelancer and don't have a tax ID (other than my social) or corporation set-up.  "California law generally imposes a minimum franchise tax of $800 on every corporation incorporated, qualified to transact business, or doing business in California.  ETA:  the case cited by Preston is from 2015 and refers to LLCs, so most likely is not on point.  Also, I am not a lawyer and am not giving legal advice here.

 


Albert B wrote:

I was informed by the CA Franchise Tax Board (chat) that participating in the Upwork marketplace is doing business in CA and requires $800 filing requirement, even though I am in Texas.

Is this true?  If not, how can I protect myself from being blindsided by FTB?



Thanks for your perspective, Mary!

Regards,

AB

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