S corp $800 fee in California

[Mary Smith]

I have a new S corp, formed in 2017. In March 2018 I paid the required minimum of $800  fee to Franchise tax Board for the year 2018. Recently, they sent me a refund of $800. I am confused, why I got it.

Thank you!

[Logan Allec]

@Jim T. For LLCs, the $800 is a tax just for having an LLC. It's not based on income or anything. And then on top of that California LLCs have the gross receipts fee, which kicks in if you have more than $250k of California gross receipts during the year.

For S corps it's a little different.  California taxes S corps at a 1.5% rate but also subjects them to a minimum $800 tax.  So basically if an S corp's California income is $53,333 or less, it will only pay the $800 tax.  But if it's more than that, it will pay tax of 1.5% x its income.

And also for C and S corps, California waives the minimum tax the first year.  So if in the first year the S corp makes only $40,000, it will only have to pay $600 rather than the standard $800 minimum that would otherwise apply in a later year.