One of our customers recently informed us of the following:
"In accordance with the California Franchise Tax Board, Publication 1017 and Revenue and Taxation Code Section 18662, we are required to withhold 7% from all payments made to non-California service providers for services rendered or rents paid.
We are not exempt (the only exemption is if you file a California Tax Return, which we do not).
California is probably the most aggressive state when it comes to out of state business and I'm not sure of the best course of action.
- Does this apply only to California government and state institutions?
- Are we legally allowed to charge a 7% surcharge to California businesses?