December 9, 2020 “Our startup is moving from California to Texas – What do we need to do?”
Since COVID, we receive several emails per week with this exact question about a startup moving out of the Golden State. The “from” tends to always be San Francisco, CA and the “to” is often Austin, TX.
The following list gives some good pointers on the “to-dos” for a startup moving out of CA:
- If you are TOTALLY moving out of CA (meaning all employees leaving) and will have less than $600K in sales to customers located in CA (or 25% or less of your total sales) going forward, file a SURC with the CA Secretary of State to surrender your CA Foreign Qualification. You will then have no Income Tax or Secretary of State filing requirements going forward in CA.
- File a Final Income Tax return in CA and ensure that that “FINAL RETURN” is selected.
- If you have a CA Sales Tax registration, file CDTFA-65 to close out your sales tax account and file a Final Sales Tax return on the regular filing date subsequent to filing CDTFA-65.
- Instruct your payroll provider to file Final payroll tax returns in CA.
- File a Change of Address with the IRS (click here).
- Instruct your local Post Office to forward your mail to the new location (click here).
The following list gives some good pointers on the “to-dos” for a startup moving into TX:
- Register for Employer Unemployment Tax in TX (click here).
- Secure TX Workers’ Comp insurance. TX is the only state where Workers’ Comp is not required – if you do not secure it, though, there is too much risk on the Company. It is cheap, costing about $250 per year per $100,000 in salary.
- Instruct your payroll company of your new TX work location for your employees – TX has no personal income tax, so you want to ensure the payroll company does not continue to withhold CA income taxes.
- Instruct your lawyer or DE Registered Agent to file a foreign qualification with the TX Secretary of State.
- Register for TX Franchise Tax (TX does have a corporate tax) once you receive your letter from the TX Secretary of State. Click here to register.
- Register for TX Sales Tax (click here). (Note: All software sales to TX customers are subject to TX sales tax. For SaaS sales, though, only 80% of the sales price is subject to TX sales tax.)
Shortcut: You can use a service like CorpNet to register for Unemployment Tax (#1 above) and Sales Tax (#6 above). Their fee is $200 per filing and will save you a TON of time.
Good luck, and enjoy the Lone Star State.