Hello and thanks for trusting me to help you today. I am a tax adviser with over 15 years of experience.
You would not need to withhold any tax for federal or CA.The state has prepared a page that shows this exactlyhttps://www.ftb.ca.gov/individuals/wsc/self_test/selftest.asp
As you will see ifthe service is not performed in CA the tax does not apply.
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May I have a further question, pls?
If the US company (level 1) hires a Canadian Company (level 2) as its subcontractor and paid 50k, and the Canadian company hires a US subcontractor (level 3) for part of the contract job needs to be done in US and paid him 10k. All other services (worth 40k) provided by the Canadian company was done in Canada. In this case, should US company (level 1) withhold tax on the payment of 10k to the Canadian company (level 2) for both federal and California?
I think it's logical. Thanks!
Could I ask for the above case, if the Canadian Co. is exempted from US tax, would 1042 (to be withheld for tax first) and 1120F (to claim refund for withholding tax paid) filing still needed or tax filing can be completely eliminated?
But as mentioned in the previous post, the Canadian Co's subcontractor will perform service in US and your answer is that the Canadian Co should be subject to withholding tax, right?
The reason that Canadian is exempted from US tax is because of the treaty benefit.
I think the Canadian company can file W8 ECI to apply for treaty exemption. If so, do you mean 1042 and 1120F are not required?
Sorry, Robin. By checking 1042 instruction, I found it's still required even W8ECI is filed.
Thank you for your reply, Robin. Sorry, I think f1120F is required as well, per 1120F instruction:
I would not think they are doing business in the US. Of course I am basing my opinion on only the limited info I have.