California’s so-called LLC gross receipts tax is officially the “LLC fee,” a tiered annual charge imposed under Revenue and Taxation Code 17942 on every LLC with at least $250,000 in California-sourced total income. The fee runs from $900 to $11,790 depending on revenue, and it sits on top of the separate $800 annual franchise tax that every California LLC owes.1California Legislative Information. California Revenue and Taxation Code 17942 It applies to any LLC that is registered with the California Secretary of State or doing business in the state and is not taxed as a corporation.2California Legislative Information. California Revenue and Taxation Code 17941 If your LLC has elected to be taxed as a corporation, you fall under the corporate franchise tax instead and do not owe this fee.
Who Owes the Fee
Below $250,000 in California-sourced total income, you still owe the flat $800 annual tax but nothing extra. At or above $250,000, you owe both the $800 and the tiered fee.1California Legislative Information. California Revenue and Taxation Code 17942 The fee is flat within each bracket, so an LLC earning $251,000 and one earning $498,000 both pay $900.
How “Total Income” Is Calculated
This is where most LLC owners get surprised. The fee is not based on profit, and it is not based on gross receipts in the usual sense. California defines “total income” as gross income plus the cost of goods sold.1California Legislative Information. California Revenue and Taxation Code 17942 COGS is added back in rather than subtracted. A product-based LLC with $800,000 in gross income and $400,000 in cost of goods sold has $1.2 million in total income for fee purposes, which pushes it into a higher bracket than its top-line revenue alone would suggest.
Gross income itself is broad. It covers sales of goods, services, rent, interest, dividends, and essentially any other income-producing activity.3Franchise Tax Board. Income Types for Businesses Operating expenses and payroll do not reduce the figure, so an LLC running at a loss can still owe the fee if its revenue is high enough.
Only California-Sourced Income Counts
The statute applies to “total income from all sources derived from or attributable to this state,” not worldwide income.1California Legislative Information. California Revenue and Taxation Code 17942 For an LLC that operates entirely inside California, that is the same as total revenue. For multi-state LLCs it matters a great deal. California uses market-based sourcing: revenue is sourced to where the customer receives the benefit of the service or product, not where the LLC is located.4Legal Information Institute. California Code of Regulations Title 18 Section 25136-2 A Nevada consulting firm serving California clients counts that revenue as California income.
Income From Another LLC
If your LLC is a member of another LLC, income flowing from that other entity is excluded from your calculation, but only when the other LLC is already paying its own fee on the same income.1California Legislative Information. California Revenue and Taxation Code 17942 If the other entity is not subject to the fee, that income counts in your total.
The Fee Brackets
Once your California-sourced total income crosses a threshold, you owe the full flat amount for that tier:1California Legislative Information. California Revenue and Taxation Code 17942
- $250,000 to $499,999: $900
- $500,000 to $999,999: $2,500
- $1,000,000 to $4,999,999: $6,000
- $5,000,000 or more: $11,790
Add the $800 annual tax to each figure. An LLC with $5 million or more in California-sourced total income owes $12,590 per year before any income tax.5Franchise Tax Board. Limited Liability Company
When It’s Due
Three separate dates matter, and they don’t all land together.
$800 Annual Tax
Due by the 15th day of the 4th month of the current tax year. For calendar-year LLCs, that’s April 15.5Franchise Tax Board. Limited Liability Company It’s a prepayment for the current year, not a payment for the prior year.
Estimated LLC Fee
Due by the 15th day of the 6th month of the current tax year, which is June 15 for calendar-year LLCs. Use Form 3536 to submit it.6California Franchise Tax Board. Instructions for Form FTB 3536 – Estimated Fee for LLCs This is one estimated payment, not quarterly installments. If your tax year ends before the 15th day of the 6th month, no estimated payment is due and the fee is paid with the return instead.
Form 568
Every LLC subject to these rules files Form 568, the Limited Liability Company Return of Income. Multi-member LLCs taxed as partnerships file by the 15th day of the 3rd month after the close of the tax year (March 15 for calendar-year filers). Single-member LLCs treated as disregarded entities file by the 15th day of the 4th month (April 15 for calendar-year filers).7Franchise Tax Board. Due Dates: Businesses The actual fee is reconciled on Form 568. If your real income differs from the June estimate, you owe the difference or receive a credit.
Extensions Don’t Push the Payment Date
California grants automatic filing extensions: seven months for multi-member LLCs, six months for single-member LLCs owned by an individual.8Franchise Tax Board. Instructions for Form FTB 3537 – Payment for Automatic Extension for LLCs An extension to file is not an extension to pay. The $800 tax, the estimated fee, and any other amounts owed are still due by their original dates. Miss those and penalties and interest start running even with a valid filing extension in place.
Penalties for Missing a Deadline
Filing late and paying late are penalized separately, and an LLC can owe both at the same time.
Late filing. If an LLC treated as a partnership misses the Form 568 deadline (including extensions), the FTB charges $18 per member per month for up to 12 months.9Franchise Tax Board. Common Penalties and Fees A 10-member LLC that files six months late owes $1,080 in late-filing penalties alone.
Late payment. Failing to pay by the due date triggers a 5% penalty on the unpaid amount plus 0.5% for each additional month the balance is outstanding, up to a combined 25%.10California Legislative Information. California Revenue and Taxation Code 19132
Underreporting. If the FTB finds a substantial underreporting of income, it can impose a 20% accuracy-related penalty on the underpayment under rules that conform to IRC Section 6662 with California modifications.11California Legislative Information. California Revenue and Taxation Code 19164
Interest. Interest runs from the original due date on any unpaid balance. For the period through mid-2026, the rate on underpayments is 7%, and the FTB adjusts it periodically.12Franchise Tax Board. Interest and Estimate Penalty Rates
The FTB can waive penalties for reasonable cause, and it offers a one-time abatement for LLCs with a clean compliance history. One-time abatement covers timeliness penalties only, not accuracy penalties or interest.13Franchise Tax Board. Help with Penalties and Fees
Ways to Reduce the Fee
The common planning move for an LLC pushing against the thresholds is to elect S-corporation taxation. S-corporations in California owe the $800 minimum franchise tax and a 1.5% tax on income, but they are not subject to the tiered LLC fee.5Franchise Tax Board. Limited Liability Company For a high-revenue, lower-margin business the math can tilt sharply. An LLC with $5 million in revenue and $200,000 in taxable income would owe $11,790 under the fee versus $3,000 under the 1.5% S-corp tax. The election has its own trade-offs, including reasonable-compensation requirements and limits on who can own shares, so run the numbers before switching.
Splitting operations across several LLCs to keep each below $250,000 does not work. Under RTC 17942, the FTB can aggregate the total income of commonly controlled LLCs when it determines the entities were formed primarily to reduce the fee, treat the combined income as a single LLC’s, and hold the related LLCs jointly and severally liable.1California Legislative Information. California Revenue and Taxation Code 17942 Legitimate multi-entity structures generally aren’t affected.
Shutting Down an LLC Doesn’t Stop the Clock
The $800 annual tax keeps accruing every year the LLC remains registered with the Secretary of State, even if the business has no income and has ceased operating.2California Legislative Information. California Revenue and Taxation Code 17941 Filing a “final” return doesn’t end the obligation. You have to file a certificate of dissolution or cancellation with the Secretary of State. The LLC fee for the final short tax year is still based on whatever total income the LLC earned during that period, and the flat bracket amounts are not prorated.