CSLB Law & Business ExamEmployment RequirementsMedium
An employer pays an employee $10,000 in wages during the calendar year. Under California's Unemployment Insurance (UI) system, the taxable wage base per employee is $7,000 per year. How much of this employee's wages are subject to State Unemployment Insurance (SUI) tax for the year?
- A$10,000
- B$3,000
- C$0
- D$7,000
Show answer & explanationAnswer & explanation
Correct answer: D. $7,000
California's SUI taxable wage base is capped at $7,000 per employee per calendar year. Even though the employee earned $10,000 total, only the first $7,000 of wages paid is subject to SUI tax; wages above that amount are not taxed for UI purposes.
Why the other options are wrong
- A. Taxing the full $10,000 ignores the statutory wage base cap.
- B. This represents the excess above the cap, which is not the taxable amount.
- C. Some SUI tax is owed on the first $7,000, so zero is incorrect.
SUI Taxable Wage Base
California's SUI tax applies only to the first $7,000 of wages paid to each employee per calendar year, regardless of total annual earnings.
- Wage base is $7,000 per employee per year
- Applies once per employee per calendar year, resets annually
- Wages above $7,000 are exempt from SUI, not from other payroll taxes
Memory trick: SUI stops counting at seven grand.