Following the California Supreme Court decision in Dynamex Operations v. Superior Court, 4 Cal. 5th 903 (2018), which identified the "ABC Test" for worker classification for the purposes of California's wage and hour determinations under the IWC Wage Orders, and now with the passage and signing into law of Assembly Bill 5 (Gonzales) (2019 Cal ALS 296, 2018 Cal AB 5, 2019 Cal Stats. ch. 296.), which extended the Dynamex ABC Test to apply in workers' compensation insurance and EDD payroll tax determinations of status, we have been inundated with questions and issues arising out of these significant changes to California worker classification law. I have also noticed that California businesses and some experienced California practitioners are misinformed, or simply mistaken, about some elements of AB 5 and its potential effects on California businesses, independent contractors, and employees.
California Governor Gavin Newsom recently signed AB 37 into law, which legalizes licensed state cannabis businesses including marijuana growers, processors, and sellers to take deductions for their business expenses on state income tax returns. It exempts these businesses from federal law section 280E, which categorizes cannabis sales under the "illegal sale of drugs" and therefore prohibits these businesses from writing off expenses as any other business would. To read AB 37 in full, click here.
On October 2, 2019, the Governor of California approved Assembly Bill 170, which details the alternative test for workers to be classified as Independent Contractors within professions that are specifically excluded from the provisions of Assembly Bill 5, which was approved last month. Workers under AB 5 are presumed to be employees unless the hiring entity demonstrates that their workers pass the 3-part "ABC" test from Dynamex Operations W. Inc. v. Superior Court, (2018) 4 Cal.5th 903, as discussed previously here. Certain professions, however, such as licensed insurance agents, direct sales salespersons, and real estate licensees, are excluded from the ABC test, and instead worker classification in those professions will be determined by conditions set forth in S. G. Borello & Sons, Inc. v. Department of Industrial Relations, (1989) 48 Cal.3d 341, namely:
The California Legislature recently passed Assembly Bill No. 321, which adds an exemption until January 1, 2024, to existing state sales and use tax laws related to "the sale of, or the storage, use, or consumption of, a new, used, or remanufactured truck with an unladen weight of 6,000 pounds or more that is purchased for use without this state." To claim the exemption, the taxpayer must provide:
The California Department of Tax and Fee Administration (CDTFA) recently announced it is offering relief to certain out-of-state retailers (referred to as "marketplace sellers") who are considered to be engaged in business in the state of California based solely on their use of in-state fulfillment centers to store inventory. Qualifying retailers may be entitled to reduced tax liabilities, penalties, and interest, effective June 27, 2019.
A Ninth Circuit Court of Appeals panel presided over by Frederic Block recently issued its opinion in Vasquez, et al. v. Jan-Pro Franchising International, Inc., finding that the "ABC test" for worker classification adopted last year in Dynamex Ops. W. Inc. v. Superior Court should apply retroactively to all wage-and-hour cases in California.
The California Franchise Tax Board (FTB) recently announced the 2018 indexed threshold values for determining whether an entity is doing business in the state. If any of the following conditions are met, the taxpayer is considered to be doing business in California:
The California Franchise Tax Board (FTB) recently announced that tax relief may be available to certain California taxpayers impacted by the recent wildfires, floods, and mudslides. Specifically, the deadlines for individual income tax returns normally due on April 17, 2018, and quarterly estimated tax payments normally due on January 16, 2018, have been extended to April 30, 2018. More information on how to claim a disaster loss with the FTB is available here.
Since 1990, the California Employment Development Department (EDD) has retained the statutory authority to issue penalties for failure to file Forms W-2 and/or 1099. Until this year, effective January 1, 2018, taxpayers assessed the steepest of those penalties, Unemployment Insurance Code section 13052.5, did not have a right to petition the assessment. However, since enactment of Assembly Bill 1695 on July 24, 2017, and effective January 1, 2018, Section 13052.5 is now petitionable before the California Unemployment Insurance Appeals Board.
The California Franchise Tax Board (FTB) released highlights from the 2017 filing season in its most recent newsletter. The number of personal income tax returns filed has increased 1 percent since the last filing year, and business entity returns filed has increased by 3.4 percent. The FTB issued over 12 million personal refunds for the 2017 season, totaling $12.6 billion, and over 165,000 business refunds, totaling $837 million.