Cannabis Industry Payroll Tax Reporting FAQs
Find answers to frequently asked questions about cannabis industry reporting.
Any business with employees must pay payroll taxes. This includes:
- Recreational businesses.
- Both licensed and unlicensed businesses with the Department of Cannabis Control.
An individual worker is an employee when they are hired by an employer to perform a service. Either the worker is an employee by a statute (statutory employee), or the hiring entity does not show that all of the following conditions are met (ABC test):
- The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.
- The person performs work that is outside of the usual course of the hiring entity's business.
- The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.
For more information:
Generally, a business becomes subject to state payroll taxes when they pay wages over $100 in a calendar quarter to one or more employees. Once becoming a subject employer, an employer must register with the EDD within 15 days.
For more information, visit Am I Required to Register as an Employer.
For more information about wages, subject wages, and Personal Income Tax (PIT) wages, refer to the following:
All wages must be reported to the EDD. This includes all statutory and ABC wages. All wages, whether paid by payroll check, personal check, cash, noncash payments (such as meals or lodging), and tips are considered compensation for an employee’s personal service.
You must report the following types of wages:
- Work performed
- Back pay award
- Holding fees
- Holiday pay
- Idle time pay
- In-lieu-of-notice pay
- Jury duty pay
- Paid sick leave
- Piece work pay
- Residual pay
- Severance pay
- Strike benefits
- Temporary Total Disability
- Vacation pay
- Vocational Rehabilitation Maintenance Allowance
- Witness fees
- Workers’ Compensation
Typically, a commercial type employer reports their payroll taxes on a:
- Quarterly Contribution Return and Report of Wages (DE 9)
- Quarterly Contribution Return and Report of Wages (Continuation) (DE 9C)
For more information, visit Required Filings and Due Dates.
California passed Assembly Bill (AB) 1245 requiring all employers to electronically submit employment tax returns, wage reports, and payroll tax deposits to the EDD. For more information, visit E-file and E-pay Mandate for Employers.
If your cannabis business cannot get a checking account, you are still required to pay payroll taxes. Contact your local Employment Tax Office to make arrangements with an EDD representative.
You must submit California payroll taxes at least quarterly, sometimes sooner based on the total amount of Personal Income Tax (PIT) withholding of your deposit. Learn more about your payroll filing responsibilities at Required Filings and Due Dates.
Records to keep include, but are not limited to:
- Time cards.
- Records of payments or payroll records (payroll check, personal check, cash, cannabis, meals, and tips).
- Other information necessary to determine payments issued to employees.
Employers are required to keep payroll records for a minimum of four years.
Records must include the following information for each worker:
- Full name (first name, middle initial, and last name).
- Social Security number.
- Date hired, rehired, or returned to work after a temporary layoff.
- Last date services were performed.
- Place of work.
- Monies paid:
- Dates and amounts of payment.
- Pay period covered.
- Cash or cash value of in-kind wages (such as meals, lodging, bonuses, gifts, and prizes) showing what the payment was for, the period that the services were performed, and the type of special payment made.
- The amounts withheld from employee wages.
- Disbursement records showing payments to workers.
- Other information necessary to determine payments to workers.
For additional information, refer to the California Employer’s Guide (DE 44) (PDF).
Yes. Cannabis workers must meet all Unemployment Insurance (UI) or State Disability Insurance (SDI) eligibility requirements in order to receive benefits.
The UI program pays benefits to workers who have lost their job. For an overview of the UI program, visit Unemployment Insurance.
The SDI program includes both Disability Insurance and Paid Family Leave, which provide short-term benefits to eligible workers who have a full or partial loss of wages due to a non-work-related illness, injury, or pregnancy. For an overview of the SDI program, visit Disability Insurance and Paid Family Leave.
- Department of Cannabis Control
Licensing information for retailers, distributors, testing laboratories, microbusinesses, and temporary cannabis events.
- Medical Cannabis Cultivation Program
Licensing information for cultivators or growers.
- California Department of Industrial Relations and US Department of Labor
Record keeping, minimum wage requirements, overtime wage requirements, and worker safety requirements.
- Internal Revenue Service
Payroll reporting requirements (including obtaining a federal employer identification number and federal income tax return requirements.
- Franchise Tax Board
State income tax return requirements.
- California Department of Tax and Fee Administration
Sales and use tax requirements.
- County governments for property tax requirements.
- City or county police departments about city or county laws.
e-Services for Business
- Check Required Filings and Due Dates
- Find Payroll Tax Seminars
- Visit Employer News and Updates
- Get EDD email notices
- Get Forms and Publications
If you have questions, Contact Payroll Taxes. You can also contact the Taxpayer Assistance Center at 1-888-745-3886 or visit your local Employment Tax Office.