There are additional provisions for waiving the tax withholding by filling out FTB Form 588 - Tax Withholding Waiver Request. Please see the list of reasons below. If you think that you fit into any of these categories, you can fill out the form and send it to the Franchise Tax Board. They have typically processed these requests within two to three weeks.
Reason For Waiver Request
A Vendor/payee has California state tax returns on file for the two most recent taxable years in which the vendor/payee has a filing requirement. Vendor/payee is considered current on any outstanding tax obligations with the Franchise Tax Board.
B Vendor/payee is making timely estimated tax payments for the current taxable year. Vendor/payee is considered current on any outstanding tax obligations with the Franchise Tax Board.
C Vendor, S corporation shareholder, partner, or member is a corporation that is not qualified to do business and does not have a permanent place of business in California but is filing a tax return based on a combined report with a corporation that does have a permanent place of business in California. On an attached sheet explain fully and provide the name and California corporation number of the corporation filing the combined report. Attach a copy of Schedule R-7 from the combined report.
D Shareholder, partner, or member is a newly admitted S corporation shareholder, partner, or member. A newly admitted S corporation shareholder, partner, or member is any entity that becomes a shareholder, partner, or member in the above-listed S corporation, partnership, or LLC after the end of the S corporation’s, partnership’s, or LLC’s taxable year. Provide the date that this shareholder, partner, or member was admitted under the letter code entered in the Reason for Waiver request box above.
E Other – Attach specific reason and include substantiation that would justify a waiver of withholding.
http://www.ftb.ca.gov/forms/2009/09_588.pdf
Tax Withholding Update
System - Thursday, December 17, 2009
