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California State Payroll Taxes - Overview

California has four state payroll taxes:

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

Employer Contributions

Most employers are tax-rated employers and pay UI taxes based on their UI rate. Nonprofit and public entity employers who choose another method are known as reimbursable employers. School employers can choose to participate in the School Employees Fund, which is a special reimbursable financing method.

Wages

Wages are compensation for an employee’s personal services, whether paid by check, cash, electronic debit, payment apps or the reasonable cash value of noncash payments such as meals and lodging. Wages are generally subject to all four payroll taxes. However, some types of employment are not subject to payroll taxes and PIT withholding.

For More Information

Refer to Types of Employment (DE 231TE) (PDF) for more information and whether the type of employment is subject to California payroll taxes.

Types of Payroll Taxes

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

UI is paid by the employer. Tax-rated employers pay a percentage on the first $7,000 in subject wages paid to each employee in a calendar year. The UI rate schedule and amount of taxable wages are determined annually. New employers pay 3.4 percent (.034) for a period of two to three years. We notify employers of their new rate each December. The maximum tax is $434 per employee per year (calculated at the highest UI tax rate of 6.2 percent x $7,000.)

Government and certain nonprofit employers can choose the reimbursable method of financing UI. They reimburse the UI Fund on a dollar-for-dollar basis for all benefits paid to their former employees.

The ETT provides funds to train employees in targeted industries to make California businesses more competitive and is an employer-paid tax. ETT funds:

  • Promote a healthy labor market.
  • Help businesses invest in a skilled and productive workforce.
  • Develop the skills of workers who produce or deliver goods and services.

For More Information
Review the current ETT Rates for this year.

The SDI program provides temporary benefit payments to workers for non-work-related illness, injury, or pregnancy. SDI tax also provides Paid Family Leave (PFL) benefits. PFL is a part of SDI and extends benefits to people who can’t work because they need to:

  • Care for a seriously ill family member.
  • Bond with a new child.
  • Participate in a qualifying event because of a family member’s military deployment.

SDI is a deduction from employees’ wages. Employers withhold a percentage for SDI on all subject wages. Effective January 1, 2024, Senate Bill 951 removes the taxable wage limit and maximum withholdings for each employee subject to SDI contributions.

For More Information

Review the current SDI rates for this year.

PIT is a tax on the income of California residents and on income that nonresidents get within California. We work with the California Franchise Tax Board (FTB) to administer this program for the Governor. We administer the reporting, collection, and enforcement of PIT withholding. The PIT program provides resources needed for California public services, including:

  • Schools
  • Public parks
  • Roads
  • Health, and human services

California PIT is withheld from employees’ pay based on the Employee’s Withholding Allowance Certificate (DE 4) on file with their employer. There is no taxable wage limit. The withholding rate is based on the employee's DE 4 and there is no maximum tax.

For More Information

For More Help

Contact the Taxpayer Assistance Center at 1-888-745-3886 or visit your local Employment Tax Office.

e-Services for Business

Use e-Services for Business to manage your employer payroll tax account online.

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Contact Us

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.

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