What Is California Employment Training Tax (ETT)?
Uncover insights into California's Employment Training Tax (ETT), a key employer contribution shaping the state's investment in workforce skills.
California’s employment tax system is a framework designed to fund various state programs that benefit both workers and the economy. Employers operating within the state are subject to several payroll taxes, including Unemployment Insurance (UI), State Disability Insurance (SDI), Personal Income Tax (PIT) withholding, and the Employment Training Tax (ETT). These taxes collectively support a range of services, from providing temporary financial assistance to unemployed individuals to funding initiatives that enhance the skills of the workforce.
Understanding California Employment Training Tax
The California Employment Training Tax (ETT) is an employer-paid tax funding job training programs. Its objective is to equip workers in targeted industries with new skills, thereby enhancing the competitiveness of businesses in California. These funds foster a healthy labor market by helping companies invest in a skilled and productive workforce.
The ETT is distinct from other payroll taxes because it is paid by the employer and is not withheld from employee wages. It operates in conjunction with other state payroll taxes administered by the Employment Development Department (EDD), such as Unemployment Insurance (UI) which is also employer-paid, and State Disability Insurance (SDI) and Personal Income Tax (PIT) which are withheld from employee wages. The ETT specifically supports programs that develop the skills of individuals who produce or deliver goods and services, aiming to bolster the state’s economic landscape.
Calculating the ETT
Calculating the Employment Training Tax involves the ETT tax rate and the taxable wage limit. The Employment Development Department (EDD) sets the ETT tax rate annually, which is typically a fixed percentage. For instance, the rate has been 0.1% in recent years.
This rate is applied to the first $7,000 in subject wages paid to each employee in a calendar year. The maximum ETT an employer would pay per employee in a year is $7 (0.1% of $7,000). For example, if an employer pays an employee $5,000 in a year, the ETT would be $5 (0.1% of $5,000). If another employee earns $10,000, the ETT would still be capped at $7.
Reporting and Paying ETT
Employers report and pay ETT along with other state payroll taxes, including Unemployment Insurance (UI), State Disability Insurance (SDI), and Personal Income Tax (PIT) withholding. These taxes are submitted quarterly to the Employment Development Department (EDD). The primary forms used for this purpose are the Quarterly Contribution Return (Form DE 9) and the Quarterly Wage Report (Form DE 9C).
The DE 9 reconciles reported wages and paid taxes for the quarter, while the DE 9C provides a detailed breakdown of wage and withholding information for each employee. These forms are typically due on the last day of the month following the end of each calendar quarter: April 30 for the first quarter (January-March), July 31 for the second quarter (April-June), October 31 for the third quarter (July-September), and January 31 for the fourth quarter (October-December). Most employers are required to file and pay electronically through the EDD’s e-Services for Business portal to avoid penalties, though paper filing options may exist in specific circumstances or with an approved waiver.