What Is California’s Employment Training Tax (ETT)?
Navigate California's Employment Training Tax (ETT) with this comprehensive guide for employers. Understand compliance and reporting.
The Employment Training Tax (ETT) is a state-mandated payroll tax in California. It funds job training programs designed to enhance the competitiveness of California businesses and develop workers’ skills, fostering a skilled workforce and supporting economic development.
Understanding the California Employment Training Tax
The California Employment Training Tax (ETT) is a specific tax levied on employers, distinct from other payroll taxes like Unemployment Insurance (UI) or State Disability Insurance (SDI). Its primary objective is to generate funds for job training initiatives across California. These programs aim to make businesses more competitive by developing workers’ skills and promoting a healthy labor market.
The ETT is part of California’s broader unemployment insurance system, though it serves a different purpose than providing direct unemployment benefits. While the Employment Development Department (EDD) administers both, ETT funds are specifically earmarked for workforce development rather than unemployment compensation. This tax contributes to programs that help businesses invest in a productive workforce and support employees in targeted industries.
Who Pays the Employment Training Tax
Employers in California are responsible for paying the Employment Training Tax (ETT). This tax is not withheld from employee wages; rather, it is an employer-paid contribution. Generally, any employer who is subject to California Unemployment Insurance (UI) laws is also required to pay ETT. This includes most businesses that pay more than a specified amount in wages to employees within a calendar quarter.
The ETT applies to the wages paid to each employee. Employers become subject to this tax obligation shortly after hiring their first employee and meeting certain wage thresholds. It is one of several payroll taxes administered by the California Employment Development Department (EDD) that employers must manage.
Calculating and Reporting the Employment Training Tax
Calculating the Employment Training Tax (ETT) involves applying a specific rate to a limited portion of each employee’s wages. For most employers, the ETT tax rate is 0.1%. This rate is applied to the first $7,000 in wages paid to each employee per calendar year, capping the maximum ETT liability per employee at $7 annually.
Employers are required to report and pay the ETT along with other payroll taxes on a quarterly basis to the Employment Development Department (EDD). The primary forms used for this reporting are the Quarterly Contribution Return (DE 9) and the Quarterly Contribution Return and Wage Report (DE 9C). The DE 9 summarizes the employer’s total contributions, while the DE 9C provides detailed wage information for each employee.
The EDD mandates that employers file and pay California employment taxes electronically using the EDD’s e-Services for Business online portal. Quarterly returns and payments for ETT, along with Unemployment Insurance, are due by the last day of the month following the end of each calendar quarter. Specific due dates are:
First quarter (January-March): April 30
Second quarter (April-June): July 31
Third quarter (July-September): October 31
Fourth quarter (October-December): January 31 of the following year
If a due date falls on a weekend or holiday, the deadline extends to the next business day. Late payments can result in penalties, including a 15% penalty plus interest.