Work Done Inside the U.S.
- An IRS Form 1099 is issued to an individual, sole proprietorship, partnership, medical (for services) or legal corporation when total 1099 reportable payments in a calendar year exceeds $600.
Work Done Inside the U.S. by Nonresident Alien/Foreign Individual/Foreign Company
The portion of a payment associated with service performed inside of the U.S. by a nonresident alien (non-U.S. citizen) is subject to federal and state tax reporting.
- An IRS Form 1042-S is issued to a foreign individual or company when paid compensation payments (i.e. honoraria, fellowship/scholarship, independent personal services) in a calendar year.
California Nonresident State Tax Withholding
Payments to California non-residents who come to California to perform services are subject to California State tax withholding at the rate of 7% if the gross payment is over $1,500 per calendar year (FTB Pub 1017).
- Withholding can only be waived or reduced by the Franchise Tax Board – federal income tax treaties do not apply to state tax.
- CA Form 588 Nonresident Withholding Waiver Request
- CA Form 589 Nonresident Reduced Withholding Request
- CA Form 590 Withholding Exemption Certificate
Suppliers will usually include sales tax on their invoices. However, if a supplier does not charge sales tax and the item is considered taxable under state guidelines, Accounts Payable is required by law to pay the State of California directly. Your department will be charged for the amount of the invoice plus applicable sales tax (we call the accrual of sales tax, "use tax").