Tax: withholding on payments for goods and services.

Existing law requires every employer who pays wages to an employee for services performed in this state to withhold from those wages, except as provided, specified income taxes, and authorizes the Franchise Tax Board to impose specified requirements for withholding of those taxes. This bill would modify existing law to extend that withholding requirement to payments made to a private entity or person pursuant to a contract for goods or services, as provided. This bill would specify that the withholding rate applicable to those payments would be 3%, and would exempt from the withholding requirement, among other payments, the first $600 of a payment for goods or services made to the contracting party in a calendar year. This bill would allow the Franchise Tax Board to have access to the information filed with the Employment Development Department, and would require the department to create and publish forms for reporting and remitting payments made pursuant to a contract for goods or services, as specified. This bill would establish a new crime with respect to the failure to withhold taxes, and thus would create a state-mandated local program. The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement. This bill would provide that no reimbursement is required by this act for a specified reason. The California Constitution authorizes the Governor to declare a fiscal emergency and to call the Legislature into special session for that purpose. The Governor issued a proclamation declaring a fiscal emergency, and calling a special session for this purpose, on December 1, 2008. This bill would state that it addresses the fiscal emergency declared by the Governor by proclamation issued on December 1, 2008, pursuant to the California Constitution.