Cannabis Industry Payroll Tax Reporting

If you own a business and hire one or more employees, you must register as an employer with the EDD within 15 days of paying more than $100 in wages in a calendar quarter.

Types of employers that are typical in the cannabis industry includes:

• Cultivators
• Manufacturers
• Distributors
• Transporters
• Dispensaries

For More Information

• Am I Required to Register as An Employer?
• e-Services for Business

In general, workers are employees unless they meet specific criteria.

An employee is:

• Any officer of a corporation.
• Any worker who is an employee under the ABC test or the Borello test.
• Any worker whose services are specifically covered by law.

Types of employees that are typical in the cannabis industry include:

• Trimmers
• Cultivators
• Testers
• Managers
• Plant caretakers
• Budtenders
• Security guards
• Salespersons
• Delivery persons

An employee may perform services less than full-time or on a temporary basis. The law does not exclude services from employment which are commonly known as day labor, part-time help, casual labor, temporary help, probationary, or outside labor.

For More Information

• California Employer's Guide (DE 44) (PDF)
• California Unemployment Insurance Code – section 621(b)
• Employment Status
• Independent Contractor Misconceptions (DE 573M) (PDF)
• Information Sheet: Casual Labor (DE 231K) (PDF)
• Information Sheet: Employment (DE 231) (PDF)
• Information Sheet: Statutory Employees (DE 231SE) (PDF)
• Labor Code – section 2775

You must report all wages paid to employees to the EDD. This includes wages, whether paid by payroll checks, personal checks, cash, electronic debits, noncash payments (such as cannabis and cannabis products, personal use of company vehicles, meals or lodging), and tips which are considered compensations for an employee’s personal services. Wages include, but are not limited to:

• Salaries, hourly pay, piece rate, or payments by the job.
• Commissions and bonuses.
• Overtime and vacation pay.
• The reasonable cash value of compensations other than cash.

An employee’s wages are subject to all payroll taxes and reportable as Personal Income Tax (PIT) wages unless otherwise stated. As the employer, you are required to pay Unemployment Insurance (UI) and Employment Training Tax on behalf of the employee. You also need to withhold PIT and State Disability Insurance (SDI) from their paychecks, report their wages, and pay those taxes to EDD.

For More Information

• What Are Wages?
• Information Sheet: Wages (DE 231A) (PDF)
• Information Sheet: Types of Payments (DE 231TP) (PDF)
• Information Sheet: Personal Income Tax Wages Reported on the Quarterly Contribution Return and Report of Wages (Continuation) (DE 9C) (DE 231PIT) (PDF)
• California Employer’s Guide (DE 44)(PDF)

All employers are required to electronically submit employment tax returns, wage reports, and payroll tax deposits to the EDD.

Typically, an 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

• E-file and E-pay Mandate for Employers
• E-File and E-Pay Mandate Waiver Request (DE 1245W) (PDF)
• Reporting Requirements
• Required Filings and Due Dates
• Calendar – Payroll Tax Due Dates
• New Employee Registry Reporting
• Independent Contractor Reporting

If your cannabis business cannot open a checking account, you are still required to pay payroll taxes. Contact your local Employment Tax Office to make payment arrangements with an EDD representative or use a credit card to make your Payroll Tax Deposit (DE 88) payments electronically.

Records to keep include, but are not limited to:

• Timecards.
• Records of payments or payroll records (payroll checks, personal checks, cash, cannabis products, lodging, use of company vehicles, bonuses, gifts, prizes, 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.

If you do not consider yourself a subject employer, you need to keep your records for at least eight years from the date they apply.

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 payment amounts.
• Pay period covered.
• Cash or cash value of in-kind wages (payroll checks, personal checks, cash, cannabis products, lodging, use of company vehicles, bonuses, gifts, prizes, meals, and tips). The records should include what the payment was for, when the work was done, and the type of special payments given.
• The amounts withheld from employees' wages.
• Disbursement records showing payments to workers.
• Other information necessary to determine payments to workers.

Yes. They must meet all UI or SDI eligibility requirements 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 (DI) and Paid Family Leave (PFL). It provides short-term DI and PFL benefits to eligible workers. For an overview of the SDI program, visit Disability Insurance and Paid Family Leave.