Taxes in California: Features and Advantages

Main Taxes in California

Income Tax

California levies a progressive income tax with rates ranging from 1% to 13.3% depending on income level.

Sales Tax

The sales tax rate in California is 7.25%, but local taxes can increase this figure up to 10.5% in some areas.

Determining the taxable base and applicable rate can be complex and requires professional expertise.

We provide services for obtaining a Sales Tax Certificate, preparing and filing a Sales and Use Tax Return. We advise business owners on registration, calculation, and reporting.

Property Tax

The average property tax rate in California is 0.74%-1.1% of housing value. While the rate is relatively low, the taxable base is high due to expensive real estate in California.

Business Taxes

For C corps, California applies a corporate tax rate of 8.84%; for S corps — 1.5% of net income (minimum $800 annually, even in case of losses).

Statement of Information (similar to Annual Report) is filed twice a year for corporations and once a year for LLCs.

Franchise Tax

A minimum of $800 annually, paid by all registered corporations and LLCs, regardless of profit.

Excise Taxes

California levies excise taxes on goods such as alcohol, tobacco, and fuel. These vary depending on the category of goods.

Favorable Tax Conditions in California

• Progressive income tax rates — beneficial for those with low and middle incomes. High rates are partially offset by various tax credits.

Taxes in California Compared to Other States

• California is one of the states with the highest tax rates for both individuals and companies.
• For small business owners, California is less favorable than states without income tax (Florida, Nevada, Texas), especially if profits are high and there is no need to be physically located in California.
• Some businesses may receive significant tax benefits, such as the RCD Credit, which is advantageous for innovative, technology, and manufacturing companies.
• For people with low and middle incomes, California’s progressive scale may be more favorable than flat rates in other states (e.g., Illinois).
• Employees with good employer benefits, startup founders with investments, and companies focused on the California market may find relocation worthwhile despite high taxes.