1. California Sales Commission Basics

In California, sales commissions are considered wages and must be paid according to the terms of the employment agreement. The state has specific laws governing when and how commissions must be paid to employees.

2. How Commission is Calculated

The standard commission calculation formula is:

Where:

• Sales Amount — Total value of the sale in USD
• Commission Rate — Percentage rate agreed upon in the employment contract

3. California Tax Considerations

Details: In California, commissions are subject to:

• Federal income tax (typically 22% withholding for supplemental wages)
• California state income tax (ranging from 1% to 12.3%)
• Social Security and Medicare taxes (7.65% combined)

This calculator allows you to input the total tax amount for your specific situation.

4. Using This Calculator

Instructions:

1. Enter the total sales amount in USD
2. Enter the commission rate as a percentage (e.g., 5 for 5%)
3. Enter the estimated tax amount in USD
4. Click "Calculate" to see your gross and net commission

5. Frequently Asked Questions (FAQ)

Q1: When must commissions be paid in California?
A: California law requires commissions to be paid as soon as they are "reasonably calculable," and by the next regular payday after the commission was earned.

Q2: Are commission agreements required in writing?
A: While not legally required, California courts strongly recommend written commission agreements to avoid disputes.

Q3: Can commission rates be changed retroactively?
A: No, California law prohibits reducing commission rates retroactively for work already performed.

Q4: How are commissions taxed differently in California?
A: Commissions are taxed as ordinary income but may have higher withholding rates initially. The actual tax liability is determined when filing annual returns.

Q5: What if a commissioned employee is terminated?
A: All earned commissions must be paid immediately upon termination in California.