California Form 588 - Nonresident Withholding Waiver Request - 2016 Page 3
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42016 Instructions for Form 588
Nonresident Withholding Waiver Request
General Information
D Length of Waiver
• The payment is being made to a resident of
California, an S corporation, a partnership,
Withholding waivers are effective for a
A Purpose
or a limited liability company (LLC), that
maximum term of 24 months and will expire
has a permanent place of business in
Use Form 588, Nonresident Withholding
on December 31 of the succeeding calendar
California. Get Form 590, Withholding
Waiver Request, to request a waiver from
year granted.
Exemption Certificate.
withholding on payments of California source
If the waiver is granted for Reason Code A, B,
• The withholding agent’s California source
income to nonresident payees.
C, or E, the resulting waiver will expire at the
income to the payee does not exceed
Do not use Form 588 to request a waiver if you
end of the succeeding calendar year granted,
$1,500 for the calendar year.
are a Foreign (non-U.S.) partner or member.
with limited exceptions.
• The payments are for income from
A foreign (non-U.S.) partner or member
intangible personal property, such as
If the waiver is granted for Reason Code D,
may file a Form 589, Nonresident Reduced
interest and dividends, unless derived in
the resulting waiver will expire at the end of
Withholding Request, to reduce or eliminate
a trade or business or the property has
the succeeding calendar year from the date
a partner’s withholding of California tax on
acquired a business situs in California.
the payee was newly admitted, with limited
effectively connected taxable income (ECTI)
• The payments are for services performed
exceptions.
from California sources, however a foreign
outside of California or for rents, royalties,
E Income Subject to
(non-U.S.) partner or member may not request
and leases on property located outside of
a withholding waiver.
California.
Withholding
• The payment is to a nonresident corporate
Do not use Form 588 to request a waiver if you
The items of income subject to withholding
director for director services, including
are a Seller of California real estate. Sellers of
include, but are not limited to:
attendance at board meetings.
California real estate should use Form 593-C,
• The payee is a tax-exempt organization
Real Estate Withholding Certificate, to claim an
• Compensation for services performed in
under either California or federal law.
exemption.
California by nonresidents.
• The payee has a completed and signed
• Rent paid to nonresidents on real or
Form 588 does not apply to payments
Form 590-P, Nonresident Withholding
personal property located in California if the
subject to backup withholding. For more
Exemption Certificate for Previously
rent is paid in the course of the withholding
information, go to ftb.ca.gov and search for
Reported Income.
agent’s business.
backup withholding.
• The income is derived from qualified
• Royalties from natural resources paid to
Form 588 does not apply to payments for
investment securities of an investment
nonresidents from business activities in
wages to employees. Wage withholding is
partnership.
California.
administered by the California Employment
• Distributions of California source taxable
G When and Where to File
Development Department (EDD). For more
income to nonresident beneficiaries from
information, go to edd.ca.gov or call
an estate or trust.
Submit a request for a waiver at least 21
888.745.3886.
• Distributions of California source taxable
business days before making a payment to
income to a domestic (nonforeign)
allow the FTB time to process the request.
B Requirement
nonresident S corporation shareholder,
Mail Form 588 to:
California Revenue and Taxation Code (R&TC)
partner, or member.
WITHHOLDING SERVICES AND
Section 18662 requires withholding 7% of
• Allocations of California source income
COMPLIANCE MS F182
income or franchise tax on certain payments
or gain to foreign (non-U.S.) nonresident
FRANCHISE TAX BOARD
made to nonresidents for income received
partners or members.
PO BOX 942867
from California sources unless an approved
• Prizes and winnings received by
SACRAMENTO CA 94267-0651
waiver or reduction is issued. The withholding
nonresidents for contests in California.
rate is 7% unless a waiver is granted by the
• Endorsement payments received for
Or
Franchise Tax Board (FTB).
services performed in California.
Fax to: 916.845.9512
• Other California source income paid to
C Withholding Waivers
H Requirement to File a
nonresidents.
The FTB issues a Waiver Determination
For more information on income subject to
California Tax Return
Notice for each waiver request. A withholding
withholding, get FTB Pub. 1017, Resident and
A payee’s waiver determination notice on
agent must have received the notice
Nonresident Withholding Guidelines.
Form 588 does not eliminate the requirement
authorizing a waiver of withholding before
F Exceptions to Withholding
to file a California tax return and pay the tax
eliminating withholding on payments made
due.
to nonresidents. The withholding agent
Withholding is not required when:
retains the Waiver Determination Notice for a
You may be assessed a penalty if:
• The payee is a government or any of its
minimum of four years and must furnish the
• You do not file a California tax return.
agencies or instrumentalities, a state or
notice to the FTB upon request.
• You file your tax return late.
any of its political subdivisions, a foreign
Withholding waivers issued by the FTB apply
• The amount of withholding does not satisfy
government or any of its subdivisions,
only for the limited purpose of determining
your tax liability.
agencies, or instrumentalities.
the withholding obligation under R&TC
• The payment is for goods. Get Form 587,
For more information on California filing
Section 18662. They do not apply to the
Nonresident Withholding Allocation
requirements, go to ftb.ca.gov.
taxability of income.
Worksheet.
Form 588 Instructions 2015 Page 1
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