How do I know if I should file California Form 568, LLC return of income for this year?

Form 568 accounts for the income, withholding, coverages, taxes, and additional financial elements of your private limited liability company, or LLC. 

Even if: 

• The LLC isn't actively doing business in California, OR
• The LLC doesn't have a California source of income

You still have to file Form 568 if the LLC is registered in California.

How to fill in California Form 568

If you have an LLC, here’s how to fill in the California Form 568:

• Line 1—Total income from Schedule IW. Enter the total income.
• Line 2—Limited liability company fee. Enter the amount of the LLC fee. The LLC must pay a fee if the total California income is equal to or greater than $250,000.

Note: Don’t enter your franchise tax paid here.

Typically, if the total California income from Form 568, Side 1, line is:

• Line 3–2021 Annual limited liability company tax. Enter the $800 annual tax here.
• Line 4–Nonconsenting nonresident members’ tax liability. Enter the total tax computed on Schedule T from Side 4 of Form 568.
• Line 5–Partnership level tax. Enter any California tax change resulting from federal partnership-level audit adjustments. If that doesn’t apply to you, leave it blank.
• Line 6 – Total tax and fee. Add Lines 2-5. 
• Line 7–Amount paid with Form FTB 3537, 2021 Form FTB 3522, and Form FTB 3536.  If the LLC is a nonconsenting, “nonresident owner” — which is defined as “partners, members, and shareholders that are non-residents of California in addition to beneficiaries of an estate or trust that are non-residents of California” — an amount will be entered on Line 15e of the Schedule K-1 from that LLC. 

In addition to amounts paid with Form FTB 3537, Form 3522 (specifically for the 2021 tax year), and Form 3536, the amount from Line 15e of the Schedule K-1 may be claimed on Line 7, but may not exceed the amount on Line 4.

• Line 8–Overpayment. Enter any overpayment from a prior year, which will be applied as a credit.
• Line 9–Withholding (Form 592-B or Form 593). If the LLC is held by a group of individuals, the LLC can either:
  •  Apply some or all of the withholding credit to its members. Or,
  • Claim a portion on Line 9 (not to exceed the total tax and fee due) and then apply the remaining portion to the members.
• Line 10–Total payments. Add Line 7, Line 8, and Line 9.
• Line 11–Use tax. If you bought items out-of-state and didn't pay sales or use tax, you’ll want to note those purchases here. (Note: To report use tax on your tax return, use the instructions below to complete the Use Tax Worksheet.)
• Line 12–Payments balance. If Line 10 is more than Line 11, subtract Line 11 from Line 10.
• Line 13–Use tax balance. If Line 11 is more than Line 10, subtract Line 10 from Line 11.
• Line 14–Tax and fee due. If Line 6 is more than Line 12, subtract Line 12 from Line 6.
• Line 15–Overpayment. If Line 12 is more than Line 6, subtract Line 6 from Line 12.
• Line 16–Amount of Line 15 to be credited to 2021 tax or fee.
• Line 17–Refund. If the total of Line 16 is less than Line 15, subtract the total from Line 15.
• Line 18–Penalties and interest. Enter penalties and interest. 
• Line 19–Total amount due

If the LLC owes use tax (but doesn't report it on the income tax return), the LLC must report and pay the tax to the California Department of Tax and Fee Administration. 

Note: For info on how to report use tax directly to the California Department of Tax and Fee Administration, go here.

Failure to timely report and pay the use tax may result in assessing interest, penalties, and fees.

What type of info do I report on the Use Tax Worksheet?

Worksheet, Line 1, purchases subject to use tax. Report purchases from California retailers subject to sales tax unless the receipt shows the California tax was paid directly to the retailer. 

Note: For more info on nontaxable and exempt purchases, visit the California Department of Tax and Fee Administration website. 

Do report: 

• Handling charges
• Only the purchases made during the year that correspond with the tax return the LLC is filing

Don’t report:

• Vehicles, vessels, and trailers that require DMV registration 
• Mobile homes or commercial coaches that require Health and Safety Code Administration registration
• Vessels documented with the US Coast Guard
• Aircraft
• Rental receipts from leasing machinery, equipment, vehicles, and other tangible personal property
• Cigarettes and tobacco products (if the purchaser is registered as a cigarette or tobacco products consumer)
• Any other state’s sales or use tax paid on the purchases

Worksheet, Line 2, sales and use tax rate. Enter the sales and use tax rate applicable to the place in California where the property is used, stored, or otherwise consumed. 

Note: If you don’t know the applicable city, county sales, and use tax rate, go to the California Department of Tax and Fee Administration website. In the search bar type “City and County Sales and Use Tax Rates.” Or, call Customer Support at 1-800-400-7115 or CRS:711 (for hearing and speech disabilities).

Worksheet, Line 4 credit for tax paid to another state. If you paid tax on purchases from other states, report the credit for out-of-state tax  on Line 1.  An LLC may claim a credit up to the amount of tax that would have been due if the purchase was made in California. For example, if the LLC paid $8.00 sales tax to another state for a purchase, and would have paid $6.00 in California, the LLC can only claim a credit of $6.00 for that purchase.

How do I complete the Use Tax Worksheet?

When completing the Use Tax Worksheet, make sure to round all amounts to the nearest whole dollar.

Then, complete the following steps: 

1. Line 1—Purchases. Enter purchases from out-of-state sellers made without payment of California sales/use tax.
2. Line 2—Applicable sales tax. Enter the applicable sales and use tax rate.
3. Line 3—Multiply. Then multiply Line 1 by the tax rate on Line 2. Enter the result here.
4. Line 4 — Out-of-state sales tax. Enter any sales or use tax paid to another state for purchases included on Line 1. 
5. Line 5—Total se tax due. Subtract Line 4 from Line 3. Enter the amount here and on Line 11. If the amount is less than zero, enter 0.
6. Then answer all the questions under J–Z on a Page 2, and AA–GG on a Page 3.
7. Sign and date.
8. Mail Form 568 with payment to:

Franchise Tax Board

PO Box 942857

Sacramento CA 94257–0501

For e-filed returns:

• Pay electronically using Web Pay, credit card, EFW, OR
•  Mail form FTB 3588 Payment Voucher for LLC e-filed Returns with payment to:

Franchise Tax Board

PO Box 942857

Sacramento CA 94257–0531