Do I owe California tax if I only worked one locum assignment there?

Yes, in almost every case. California taxes nonresidents on income sourced to services performed within the state, regardless of how short the assignment was. A single two-week locum stint at a California hospital generally creates California-source income that must be reported on a nonresident return, even if you never set foot in the state again that year and even if you live and are domiciled somewhere else entirely.

How does California tax nonresident 1099 income?

California sources 1099 independent contractor income to where the services are physically performed, not to where your business is based or where you live. If you worked as a locum physician physically present in California, the income attributable to those days is California-source income and is reportable on Form 540NR, California's nonresident/part-year resident return, regardless of your state of residence or where the paying agency is headquartered.

Is there a minimum number of days before California requires a nonresident locum to file?

California does not use a simple day-count safe harbor for nonresident 1099 workers the way some states do. Filing is generally triggered once you have California-source gross income above the state's minimum filing threshold for nonresidents, which is a low bar for most locum-level income. Practically, if you worked even a short assignment in California and were paid meaningfully for it, plan to file a nonresident return.

Can I avoid California tax by having my LLC or S-corp based in another state?

No. Where your entity is formed or headquartered is irrelevant to California sourcing. California looks through the entity to where the underlying personal services were performed. A Texas-based S-corp with a physician-employee who works a locum assignment inside California still generates California-source income for the work performed in the state, and the S-corp itself may owe California franchise tax if it's "doing business" in California.

Is it worth forming an S-corp if some of my income is California-sourced?

It depends on how much of your income is California-sourced versus earned in no-tax or lower-tax states. An S-corp still saves self-employment tax on the reasonable-compensation split regardless of state, but if you're doing business in California, the entity owes California's separate corporate-level taxes on top of the usual S-corp costs (payroll, reasonable compensation analysis, tax prep). Run the break-even math including the California entity-level cost before assuming the S-corp savings hold up the same way they would in a no-tax state.

Does California give credit for tax paid to my home state, or does my home state give credit for California tax?

Generally your home state gives you a credit for tax paid to California on the same income, not the other way around, since California taxes nonresidents on California-source income regardless of residency. Most states (with some exceptions) allow a resident credit for tax paid to another state on income also taxed by the home state, which prevents full double taxation, but it does not eliminate the requirement to file and pay California first. If your home state has no income tax, there's no credit to claim and the California tax is a true additional cost.

Do W-2 locum assignments in California work the same way as 1099 assignments?

The sourcing concept is similar, California taxes wages earned for services performed in the state, but the mechanics differ. W-2 agencies are generally required to withhold California income tax from wages for work performed in California, so you may see withholding automatically. 1099 independent contractors get no withholding by default, which is why so many locum physicians are surprised by a California tax bill at filing time; nobody withheld anything along the way, and estimated payments are the taxpayer's own responsibility.

540NR

State Guide: California

Locum Tenens Taxes in California

California taxes nonresident locum income the moment you set foot in the state, has no reciprocity with any other state, and adds a separate layer of entity-level tax if you're structured as an S-corp. Here's what that actually costs.

12 min read Updated June 2026 By Bryan Martin, CPA

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TL;DR: California, in 60 Seconds

California has the highest top marginal state income tax rate in the country, 13.3% at the top bracket (including the Mental Health Services Act surcharge on income over $1 million), and it has no reciprocity agreements with any other state. That combination, plus California's famously aggressive sourcing and residency enforcement, is why most CPAs who work with traveling physicians consider California the single hardest state to work a locum assignment in. If you're a 1099 locum and you perform services physically in California, California generally taxes the income attributable to those days, no matter how short the assignment was, no matter where you live, and no matter where your business entity is based.

Why California Is the Hardest State for a Locum to Work

Locum physicians get used to a certain rhythm: take the assignment, do the work, deal with taxes at filing time using whatever state rules apply. That rhythm breaks down in California. Three things make it different from almost every other state you might work in.

First, the rate. California's top marginal individual income tax rate is 13.3%, the highest of any state, layered on top of federal tax. Second, no reciprocity. Some states have reciprocal agreements that let a nonresident's home state handle the tax instead; California has none. Third, and most consequential for locums specifically, California's Franchise Tax Board (FTB) is known for aggressively sourcing income to the state and auditing nonresidents who claim otherwise. Short assignments, part-year work, and out-of-state entities do not create the exemptions most physicians assume they do.

None of this means you should avoid California assignments. Locum rates in California are often high enough to justify the tax cost. It does mean you need to go in with accurate numbers instead of finding out what you owe when your accountant runs the return in April.

13.3%

CA top marginal individual income tax rate

$800

Minimum annual CA franchise tax for an S-corp doing business in the state

0 Days

Minimum days worked before CA sourcing rules can apply

This guide is educational and not individualized tax advice. Every rate, threshold, and form reference above requires verification against the current tax year. Confirm your specific numbers with a tax professional before filing or structuring an assignment.

CA Nonresident Filing Triggers for 1099 Locum Work

When you need to file California Form 540NR

If you're not a California resident but you earned income from services performed inside California, you generally must file California Form 540NR, the Nonresident or Part-Year Resident Income Tax Return. This applies to locum physicians whether you're paid 1099 directly, through a staffing agency, or through your own S-corp or LLC that assigns you to work at a California facility.

The filing obligation is triggered by California-source gross income exceeding the state's minimum filing thresholds for nonresidents, which are adjusted annually and are low relative to typical locum compensation. In practice, almost any paid locum assignment physically performed in California, even a single week, generates enough California-source income to require a return.

Form 540NR Basics for Locum Physicians

Who files it

Any nonresident with California-source income above the filing threshold

What's taxed

Only your California-source income, not your worldwide income

Rate structure

California's full progressive rate schedule applies, up to 13.3% at the top bracket, applied to CA-source income at your effective rate on total income

Reciprocity with other states

None — California has no reciprocal filing agreements

Estimated payments

Required if you expect to owe CA tax and no withholding is covering it

California Taxes Your CA Income at Your Full-Income Rate

California uses your total income from all sources to determine the tax rate that applies to your California-source income, then applies that rate only to the California portion. This means a high-earning locum physician doesn't get a lower California rate just because California is a small slice of total income; the rate is set by your full income picture, not just what you earned in-state.

CA's Aggressive Sourcing Rules

Why 'I only worked 2 weeks there' doesn't save you

This is the single most misunderstood part of California taxes for traveling physicians. Locums are used to thinking in terms of residency: if I don't live somewhere and don't spend much time there, I probably don't owe tax there. California doesn't work that way for 1099 or W-2 income earned from services performed in the state.

California sources compensation for personal services to the location where the services are physically performed. There is no minimum-day exemption, no de minimis carve-out for short assignments, and no exception because you're "just passing through" on a locum contract. A two-week assignment at a California hospital generates California-source income for those two weeks, full stop, and it's taxable in California regardless of your state of residence, your entity structure, or how the payment was routed.

The practical implication

Every day you're physically present and working in California counts toward California-source income, and there's no threshold below which the state simply ignores it. Compare this to some other states, which use day-count safe harbors (for example, taxing nonresidents only after they exceed a certain number of days worked in-state). California has nothing comparable for personal services income. The moment you're paid for work performed in California, that income is on the table.

This also applies regardless of how your income is structured. Pay yourself through an S-corp based in a no-tax state, and the wages or distributions attributable to the days you actually worked in California are still California-source income to you personally, and the entity itself may separately owe California franchise tax if it's doing business in the state (more on that below).

Think of California sourcing in terms of a simple allocation: take your total 1099 income for the year, and allocate it based on where you physically performed the work. The portion tied to days worked in California is California-source income. It doesn't matter if that's 5% of your year or 50%.

Not sure how much of your income California will claim?

We'll calculate your California-source income allocation based on your actual assignment calendar and estimate what you'll owe before you're surprised at filing time.

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The S-Corp Question in California

Why the standard locum S-corp break-even math changes here

Most locum physicians who cross roughly $150,000-$200,000 in 1099 net income start hearing about S-corp elections to save on self-employment tax. That math generally still works in most states. California adds two costs to the equation that don't exist elsewhere.

1. The $800 Minimum Franchise Tax

Any corporation, including an S-corp, that is "doing business" in California, or is registered/qualified to do business in California, owes a minimum annual franchise tax of $800, regardless of profitability. If your locum S-corp works even one assignment physically performed in California, the entity may be considered to be doing business in the state and could owe this minimum tax, in addition to whatever tax you owe personally on your California-source wages or distributions.

2. The 1.5% S-Corp Franchise Tax on Net Income

On top of the flat minimum, California imposes a 1.5% franchise tax on the S-corp's net income allocated to California (subject to the $800 minimum, whichever is higher). This is an entity-level tax that doesn't exist for S-corps operating purely in no-tax states. It's a real cost that has to be weighed against the self-employment tax savings the S-corp is supposed to be generating.

	S-Corp in a No-Tax State Only	S-Corp With CA-Sourced Income
Self-employment tax savings	Full savings from reasonable-compensation split	Same savings, still worth pursuing
State entity-level tax	None	$800 minimum, or 1.5% of CA-allocated net income if higher
Personal CA nonresident filing	N/A	Still required on CA-source wages/distributions (Form 540NR)
Added compliance cost	Federal S-corp return + payroll	Federal + CA franchise tax return (Form 100S) + payroll

The S-Corp Doesn't Make CA Income Disappear

Some physicians assume that routing income through an out-of-state S-corp shields California-sourced earnings from California tax. It doesn't. California sources through to the individual performing the services, and the entity itself can separately owe California franchise tax. An S-corp is still often worth it, but treat the California cost as a real line item, not a rounding error.

Taxstra Tip

The break-even point for an S-corp election typically assumes 100% of the self-employment tax savings drop straight to your bottom line. In California, subtract the $800 minimum franchise tax (or 1.5% of CA-allocated net income, whichever is higher) plus the added Form 100S preparation cost before deciding whether the election still clears your break-even threshold for the year you're taking California assignments.

Worked Example: A Locum Splitting Time Between CA and a No-Tax State

Illustrative numbers, not a specific client outcome

Illustrative example, not a specific client outcome. Consider a locum emergency medicine physician who earns $300,000 in total 1099 income for the year. She spends 4 months (roughly 33%) of her working days on assignments in California and 8 months (roughly 67%) on assignments in Texas, a no-income-tax state. She maintains her tax home in Texas.

	Amount / Estimate
Total 1099 income	$300,000
Days worked in California (approx. 33%)	~$99,000 allocated as CA-source income
Days worked in Texas (approx. 67%)	~$201,000 allocated as TX-source income (no state tax)
CA tax rate applied	Determined by total income bracket, applied only to the $99,000 CA-source portion
Estimated CA tax liability (illustrative, ~9-10% effective rate on the CA portion at this income level)	Roughly $9,000-$10,000 — REVIEW: illustrative estimate only, confirm actual CA 540NR calculation
TX tax liability	$0
If structured as CA-doing-business S-corp	Add $800 minimum franchise tax (or 1.5% of CA-allocated net income, if higher)

The exact dollar figure depends on California's actual bracket mechanics applied to her total income, not just the California-source slice, so this estimate should be treated as directional. The key planning takeaway isn't the precise number, it's that roughly a third of her working days generated a real, calculable California tax bill, and none of that would have shown up automatically since 1099 income has no default withholding. Without quarterly estimated payments set aside specifically for the California portion, she'd be facing a five-figure surprise at filing time, plus potential underpayment penalties.

Working (or Considering) a California Assignment?

We'll estimate your California-source tax exposure before you sign the contract, and tell you whether an S-corp still makes sense given the mix of states you're working in.

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Common Mistakes

What trips up locum physicians working California assignments

Mistake 1: Assuming W-2 Withholding Logic Applies

No Automatic Withholding on 1099 Income

W-2 locum agencies often withhold CA tax automatically for work performed in-state. 1099 contractors get no withholding by default, so the full liability accrues silently until you file.

Estimated Payments Are on You

If you don't make quarterly CA estimated payments covering your CA-source income, you can owe both the tax and underpayment penalties at filing time.

Mistake 2: Not Tracking CA Work Days Precisely

No Day-by-Day Log

Without a precise record of which days were worked in California versus elsewhere, you're guessing at your sourcing allocation, and guessing wrong in an audit costs you.

Travel Days and Prep Days Count Too

Time spent in California for credentialing, orientation, or admin tied to the assignment can also factor into sourcing. Track more than just clinical shift days.

Two more mistakes worth flagging: assuming that because your S-corp is registered in Texas or Nevada, California can't reach your income (it can, through sourcing to the individual and potentially to the entity itself), and waiting until tax season to figure out the California allocation instead of tracking it assignment by assignment as the year goes. The physicians who come out of a California-heavy year in the best shape are the ones who treated day-tracking as part of the job from the first day of the first assignment.

Assumption	Reality in California
"I only worked there 2 weeks, it doesn't count"	Any CA-source income is taxable, no minimum-day exemption for personal services income
"My S-corp is based in a no-tax state, so I'm covered"	CA sources through to the individual; the entity may also owe CA franchise tax
"California will withhold what I owe, like a W-2 job"	1099 income has no default withholding; estimated payments are your responsibility
"I'll figure out the day count at tax time"	Imprecise day tracking creates real audit risk and a weaker position if challenged

Frequently Asked Questions

Related Resources

Complete Locum Tenens Tax Guide

The full framework for 1099 locum tax planning, entity choice, and deductions.

Locum Tenens Tax Home Guide

How your tax home affects travel deductions and state residency planning.

Locum Tenens CPA Services

Dedicated tax planning and prep for traveling 1099 physicians.

Don't Let California Surprise You at Filing Time.

We work with locum physicians every day who split time across California and no-tax states. We'll map your assignment calendar, estimate your California exposure, and make sure your entity structure and estimated payments actually fit the way you work.

Book a Free Consultation

No obligation • Takes 30 minutes • Done over the phone