Business Finances

Introduction

About one exam question in seven comes from Business Finances, and it is the section where purely conceptual studying fails. The material blends two very different demands: memorized tax rules — who deposits what, and when — and live arithmetic you have to set up correctly with the calculator the exam provides. Candidates who read the words but never work the numbers reliably underperform here.

That is the section's reputation, and it is deserved. The blueprint rates Business Finances High difficulty even though it is only the fourth-largest slice of the exam, because the questions punish two specific weaknesses: confusing markup with margin, and mis-classifying a cost — dropping office or sales-vehicle depreciation into direct job cost, for instance. Both are traps the official study guide builds sample questions around.

A word on how to read this chapter. Much of Business Finances is ordinary accounting and estimating — markup, margin, break-even, working capital, cash flow, financial statements. These are business concepts, not California law; there is no code section behind "a 20% markup is not a 20% margin," and this chapter presents that material as professional practice, not statute. Where the section does touch law — payroll-tax deposits, sales and use tax, the state franchise tax, PACE financing — real citations exist, and this chapter uses them. The line between "practice" and "law" is drawn deliberately throughout, because on a Your-Money-or-Your-Life topic it matters that you know which is which.

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Learning objectives

After working through this chapter you should be able to:

• Distinguish markup from margin, convert between them, and price a job to hit a target margin rather than under-earning by treating a markup number as a margin.
• Classify a cost correctly as direct (job) cost, overhead, or general and administrative (G&A) — and know why sales-vehicle or office depreciation belongs in G&A.
• Compute a break-even point from fixed costs and contribution margin, and separate fixed from variable costs.
• Read the two core financial statements — the balance sheet (a snapshot) and the income statement (a period) — and state the accounting equation.
• Calculate the current ratio, quick ratio, and working capital, and explain what each says about a contractor's ability to pay bills and obtain bonding.
• Explain cash management and how over-billing and under-billing affect cash even on a profitable job.
• Identify who pays each payroll tax — FICA, FUTA, and the four California EDD taxes (UI, ETT, SDI, PIT) — and how the federal deposit schedule is set by the lookback period, not by headcount.
• Describe California sales and use tax on materials (the "contractor as consumer" rule), the $800 minimum franchise/LLC tax, depreciation, and the special duties that attach to arranging PACE financing.

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Part A — Estimating and pricing: the math that pays

Markup versus margin — the single most-tested trap

Start here, because more candidates lose points to this one confusion than to any other idea in the section. Markup and margin are not the same number. Markup is profit expressed as a percentage of cost — it is added on top of cost. Margin is profit expressed as a percentage of the selling price. The two use different denominators, so the same dollar of profit produces a larger markup percentage than margin percentage. This is a cost-accounting concept with no California code section — it is business practice, and the exam tests whether you understand the arithmetic, not a statute.

Work it once and the pattern sticks. Suppose a job costs the contractor $10,000 and the contractor applies a 20% markup:

• Price = $10,000 + (20% × $10,000) = $12,000. Profit is $2,000.
• The margin on that job is $2,000 ÷ $12,000 = 16.7% — not 20%.

So a 20% markup is only about a 16.7% margin. A contractor who wanted a true 20% margin but marked up 20% just quietly under-earned. To price to a target margin, divide cost by (1 − margin):

• To earn a 20% margin on a $10,000 job, price = $10,000 ÷ (1 − 0.20) = $10,000 ÷ 0.80 = $12,500, which is a 25% markup.
• Check: profit $2,500 ÷ price $12,500 = 20% margin. ✔

The reliable conversion: margin = markup ÷ (1 + markup), and markup = margin ÷ (1 − margin). If you remember nothing else, remember that markup rides on cost and margin rides on price, and that a markup percentage is always the bigger of the two.

California example. A San Jose remodeler figures direct costs of $80,000 on a job and wants to clear a 25% profit margin. Marking up 25% would price the job at $100,000 — but that yields only a 20% margin ($20,000 ÷ $100,000). To actually earn 25%, the contractor must price at $80,000 ÷ 0.75 = $106,667, a 33.3% markup. Treating the target margin as if it were a markup would have left roughly $6,667 of intended profit on the table.

Classifying costs: direct, overhead, and G&A

You cannot price a job or read a financial statement correctly until every cost is sorted into the right bucket. Three categories matter, and the exam builds a sample question on getting them right:

• Direct (job) costs are traceable to a specific project — the labor on that job, the materials installed in it, the subcontractors working on it. If you can point to the job the dollar belongs to, it is a direct cost.
• Overhead (indirect construction cost) supports jobs generally but not any single one — a foreman covering several projects at once, or a piece of equipment shared across jobs.
• General and administrative (G&A) costs run the company whether or not any job is underway — office rent, office staff salaries, and the depreciation on the office computer or the sales vehicle.

The tested trap is precise: depreciation on a sales vehicle or office equipment is G&A, not a direct job cost. Dump it into direct cost and you distort the price of every bid and misread profitability. Overhead and G&A are also not interchangeable — one is indirect construction cost that supports field work, the other is the cost of simply keeping the doors open. This is a construction cost-accounting concept, not a code section.

California example. A Bakersfield contractor's estimator loads the annual depreciation on the owner's pickup — used for sales calls and estimating, never assigned to one job — into the direct-cost column of a bid. The bid now looks more expensive than the work actually is, and the company's job-cost reports overstate what each project costs to build. That truck's depreciation belongs in G&A, recovered through markup spread across all work, not charged to a single customer.

Depreciation

Depreciation spreads the cost of a long-lived asset — a truck, a backhoe — across the years it is used, instead of expensing the whole purchase at once. The straight-line method charges an equal amount each year; accelerated methods front-load the expense into the early years. Two features matter for the exam. First, depreciation is a non-cash expense: it lowers reported (and taxable) income without any cash leaving the bank that year — the cash left when the asset was bought. Second, depreciation must be classified to the correct cost category — often G&A for an office or sales asset, per the rule above. This is an accounting and tax concept with no California code section.

Straight-line is easy to compute: (cost − salvage value) ÷ useful life. A $60,000 truck with a $10,000 salvage value and a 5-year life depreciates ($60,000 − $10,000) ÷ 5 = $10,000 per year. That $10,000 reduces taxable income annually, but no cash moves — which is exactly why a profitable, depreciating company can still show plenty of cash, and why depreciation is added back when you analyze cash flow.

Break-even analysis

The break-even point is the sales volume at which total revenue equals total cost, so profit is exactly zero. Below it the business loses money; above it, each additional dollar of sales contributes to profit. You find it by dividing fixed costs by the contribution margin — where contribution margin is selling price minus variable cost, expressed per unit or as a ratio of revenue. A prerequisite is telling fixed costs (rent, salaried office staff, insurance — they do not move with volume) from variable costs (job labor and materials that rise and fall with the work). This is a managerial-accounting concept with no California code section.

Put numbers on it. Suppose a contractor's fixed annual overhead (G&A) is $120,000, and on the work it performs, variable (direct) costs run 70% of revenue — leaving a 30% contribution margin. Break-even revenue = $120,000 ÷ 0.30 = $400,000. The company must book $400,000 of work just to cover its overhead; the first dollar of profit comes only after that.

• Check: $400,000 revenue − $280,000 variable cost (70%) = $120,000 contribution − $120,000 fixed cost = $0 profit. ✔

Two misconceptions to bury: break-even is where revenue equals total cost, not where "revenue equals profit"; and not all overhead is variable — much of it (rent, administrative salaries) is fixed and must be covered before you earn a cent.

Budgeting and planning

A budget is a forward-looking plan — an estimate of revenue and expenses that lets the contractor set prices, control spending, and anticipate when cash will be tight. It is not a rear-view record of what was already spent; that is a mistaken but common view. Good planning separates fixed from variable costs, deliberately builds overhead recovery and profit into the markup, and then compares actual results against the plan so overruns surface early, while there is still time to react. Budgets feed straight into the two calculations above: the markup needed to hit a target margin, and the break-even volume the company must reach. This is a business-planning concept with no California code section.

One idea the exam rewards: overhead must be spread across all work, not recovered from a single large job. A contractor who assumes "the big job will carry the office" and bids small jobs at bare cost will fail to recover overhead on most of the year's volume. Every job should carry its share.

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Part B — Financial reporting: reading the numbers

The two core financial statements

Two reports tell different stories, and the exam tests which is which. The balance sheet is a snapshot at a single point in time — it lists assets, liabilities, and owner's equity as of a given date. It is governed by the accounting equation: Assets = Liabilities + Equity (equity, not "liabilities minus equity"). The income statement — also called the profit-and-loss (P&L) statement — covers a period of time (a month, a quarter, a year) and shows revenue minus expenses to arrive at net profit or loss. These are GAAP financial-reporting concepts with no California code section.

The distinction is more than bookkeeping trivia: sureties and lenders read both statements to decide how much bonding capacity or credit to extend. A balance sheet that shows healthy equity and a P&L that shows consistent profit is what unlocks a larger bonding line.

California example. A contractor applying for a $2 million bonding line hands the surety a balance sheet dated December 31 — assets of $500,000, liabilities of $300,000, and therefore $200,000 of equity ($500,000 − $300,000) — plus a P&L for the year showing $1.8 million of revenue and $150,000 of net profit. The snapshot proves what the company is worth today; the P&L proves what it earned over the year. The surety needs both.

Liquidity: current ratio, quick ratio, and working capital

Liquidity measures answer one question: can the business pay its near-term bills? Three figures do the work, all drawn from current assets (cash and things convertible to cash within a year) and current liabilities (bills due within a year). These are standard financial-ratio concepts — no California code section — and they show up as calculator problems.

• Current ratio = current assets ÷ current liabilities. A ratio of 2.0 means two dollars of current assets for every dollar of current bills.
• Quick (acid-test) ratio = the same idea but excluding inventory, using only the most liquid assets. It is deliberately stricter because inventory may not convert to cash quickly.
• Working capital = current assets − current liabilities, as a dollar amount — not a ratio.

Run one set of numbers. A contractor has current assets of $200,000 (of which $40,000 is inventory) and current liabilities of $100,000:

• Current ratio = $200,000 ÷ $100,000 = 2.0
• Quick ratio = ($200,000 − $40,000) ÷ $100,000 = $160,000 ÷ $100,000 = 1.6
• Working capital = $200,000 − $100,000 = $100,000

Higher values generally signal a stronger ability to meet short-term obligations, which — like the statements above — affects bonding capacity. Two misconceptions the exam probes: the quick ratio excludes inventory (it does not include it), and working capital is a dollar figure, not a ratio.

Recordkeeping and the cash-versus-accrual distinction

Contractors must keep organized books — job-cost records, ledgers, payroll records, and tax filings — both to run the business and to satisfy tax and bonding requirements. Job-cost records are not optional just because taxes get filed; they are how a contractor knows whether each job actually made money. This is an accounting-methods concept with no California code section.

The tested distinction is cash versus accrual accounting. Cash-basis accounting records revenue and expenses when money changes hands. Accrual-basis accounting records revenue when it is earned and expenses when they are incurred, regardless of when cash moves — which does a far better job of matching costs to the jobs that generated them. The key point: the two methods do not report the same profit in a given period, because timing differs. Accrual generally gives the truer picture of a construction company's performance, which is why sureties prefer it.

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Part C — Cash management

Keeping cash on hand — and why a profitable job can still fail

Cash management is the discipline of keeping enough cash on hand to pay workers, suppliers, and taxes on time. The counterintuitive truth the exam wants you to internalize: a profitable job can still run a company out of cash. Profit is earned over the life of a job, but cash comes in on the owner's payment schedule and goes out on payroll and supplier terms — and if the outflows lead the inflows, even a job that will ultimately profit can trigger a cash crisis that sinks the business. Timing, not just profitability, decides survival. This is a construction financial-management concept with no California code section.

Over-billing and under-billing

On progress-billed jobs, the billing rarely lines up exactly with the work in place, and the exam tests both directions:

• Over-billing means you have billed more than the value of the work completed to date. It brings in cash early, but that cash represents work not yet earned — it is effectively a liability, and it can mask trouble on a job (the money looks fine while the work falls behind). On a consumer home improvement contract, billing ahead of the work is not just a cash tactic — it can violate B&P §7159.5, which bars payments exceeding the value of work performed (see Chapter 5). Over-billing is therefore never simply "good."
• Under-billing means you have completed more work than you have billed for. You are effectively financing the owner with your own cash, and even a profitable job can leave you short.

The corrective discipline is to track billings against cost-to-date and percent complete, so the money collected stays lined up with the value actually installed. This links Business Finances directly to the progress-payment and retention rules in the Contracts section.

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Part D — Taxes

This is the part of Business Finances with real legal citations. Where a rule below rests on the Internal Revenue Code, the California Revenue & Taxation Code, or the Unemployment Insurance Code, treat it as law; the estimating math in Parts A–C is practice.

Federal payroll-tax deposits and the lookback period

Every employer must deposit — with the IRS — the federal income tax withheld from employees plus both shares of Social Security and Medicare (FICA). The trap the CSLB guide builds a sample question around is how often you must deposit: the schedule is monthly or semiweekly, set by the total tax reported during a prior "lookback" period — not by how many employees you have (IRS Publication 15, Circular E; Internal Revenue Code).

The standard figures, stable from the federal rules:

• If your reported employment tax in the lookback period was $50,000 or less, you are a monthly depositor; more than $50,000 makes you a semiweekly depositor.
• A very large single-day liability — $100,000 or more accumulated — triggers a next-business-day deposit regardless of your normal schedule.
• If your total quarterly liability is under $2,500, you may generally pay it with the return rather than deposit separately.

The misconceptions the exam targets: that deposit frequency depends on headcount (it depends on the dollar amount of accumulated liability), and that federal and California deposits follow the same schedule (they do not — the state has its own EDD schedule).

California example. A Riverside contractor with three employees assumes "we're small, so we deposit monthly." But the frequency turns on the lookback dollar amount, not the three workers — and a single large bonus run that pushes accumulated liability to $100,000 in a day would force a next-business-day deposit no matter how few employees are on the payroll.

FICA and FUTA — who pays what

The core concept is who bears each tax: matched, employer-only, or employee-only.

• FICA funds Social Security and Medicare. The employer withholds the employee's share from wages and pays a matching employer share. Social Security is taxed at 6.2% on each side (employer and employee) up to an annual wage base that the IRS adjusts each year; Medicare is 1.45% on each side with no wage cap (a small additional Medicare tax applies to high earners and is withheld from the employee only).
• FUTA — federal unemployment tax — is paid by the employer only and is never withheld from the employee's pay.

Two misconceptions the exam probes directly: that FUTA comes out of the worker's check (it does not — employer only), and that Medicare stops at the same wage base as Social Security (it does not — Medicare has no cap). Source: IRS Publication 15 (Circular E).

For payroll-cost estimating, the matching matters. On a worker earning $5,000 in a month (below the Social Security wage base), the employer's FICA match is $5,000 × 6.2% ($310 Social Security) + $5,000 × 1.45% ($72.50 Medicare) = $382.50 — a real cost on top of the wage, before FUTA and the state taxes below. Labor "costs" more than the wage rate, and a bid must carry that burden.

California payroll taxes: UI, ETT, SDI, PIT

California layers four state payroll taxes on top of the federal ones, all administered by the Employment Development Department (EDD) and explained in the California Employer's Guide (DE 44). The tested point is which are employer-paid and which are withheld from the employee:

• Unemployment Insurance (UI) — employer-paid (Cal. Unemployment Insurance Code §976).
• Employment Training Tax (ETT) — employer-paid (Cal. Unemployment Insurance Code §976.6 / §984 framework).
• State Disability Insurance (SDI) — withheld from the employee (Cal. Unemployment Insurance Code §984).
• Personal Income Tax (PIT) withholding — withheld from the employee and remitted by the employer (Cal. Unemployment Insurance Code §13020).

Two misconceptions to correct: that SDI or ETT are federal taxes (they are California state taxes, separate from and additional to the federal deposits), and that the employer pays SDI (it is withheld from the employee — the employer's California payroll taxes are UI and ETT). A clean way to remember it: employer pays UI and ETT; the employee's check funds SDI and PIT.

Sales and use tax on materials

California imposes sales and use tax on the sale and use of tangible materials (Cal. Rev. & Tax. Code §6001 et seq.). For most construction work, a special rule applies: the contractor is treated as the consumer of the materials it furnishes and installs. That means the contractor generally pays sales tax on the cost of the materials — to its supplier — rather than charging the customer sales tax on the installed price of the finished work. (Certain items classified as fixtures are treated differently, with the contractor acting more like a retailer; this is the nuance the exam hints at but rarely drills.) Use tax fills the gap when materials are bought out of state without California tax paid — so buying across the state line does not escape the tax.

The misconceptions: that a contractor always charges the customer sales tax on the full installed price (usually it does not — it paid the tax on the materials as the consumer), and that out-of-state purchases avoid California tax (use tax captures them). For estimating, the lesson is to build the materials tax into the bid as a cost, since the contractor — not the customer — typically bears it.

State income and franchise tax — the $800 minimum

California taxes business income, and how depends on the entity form. Sole proprietors and partners report business income on their personal returns. Corporations and LLCs face entity-level taxes administered by the Franchise Tax Board (FTB) (Cal. Rev. & Tax. Code §17000 et seq. and §23000 et seq.):

• A corporation owes an $800 minimum franchise tax — even in a year with no profit (corporations are generally exempt from the minimum only in their first taxable year; confirm current FTB guidance).
• An LLC owes an $800 annual tax plus an income-based LLC fee once gross receipts exceed set thresholds. (The temporary first-year $800 exemption for LLCs applied only to 2021–2023 under AB 85 and has expired — an LLC formed in 2024 or later owes the $800 in its first year. Corporations remain first-year-exempt from the $800 minimum.)

The tested misconceptions: that an LLC owes only the $800 (it also owes the income-based fee above certain revenue), and that a corporation with no profit owes no state tax (the $800 minimum still applies). The practical takeaway for the budgeting subtopic: choosing an entity carries a recurring annual tax cost, and the $800 floor is the figure to remember. Sources: FTB Limited Liability Company and Corporations guidance.

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Part E — PACE financing

PACE (Property Assessed Clean Energy) lets a property owner finance energy- or water-efficiency and certain resilience improvements and repay through an assessment on the property-tax bill — not through an ordinary bank loan. Because the CSLB study guide expressly names PACE, it is fair game, and it sits at the intersection of Business Finances and consumer protection.

The exam-relevant point is that a contractor who solicits or arranges PACE-financed work acts as a PACE solicitor and takes on strict duties: assessing the owner's ability to repay, delivering required disclosures, and complying with home-improvement contract rules (Cal. Financial Code §22000 et seq. and §22680 et seq.; Cal. Streets & Highways Code §5898.20 et seq.; and B&P §7159, the home-improvement contract statute from Chapter 5). Misusing PACE — pressuring seniors or misrepresenting terms — carries serious liability.

Two misconceptions the exam can probe: that PACE is just a bank loan (it is repaid as a property-tax assessment tied to the property, and can transfer with the property), and that a contractor arranging PACE has no special duties (it has suitability and disclosure obligations beyond an ordinary job).

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Key numbers & deadlines

Markup vs. margin: markup rides on cost, margin rides on price. margin = markup ÷ (1 + markup); markup = margin ÷ (1 − margin). A 20% markup ≈ 16.7% margin; to earn a 20% margin, mark up 25% (price = cost ÷ 0.80). (Business concept — no code section.)

Break-even: fixed costs ÷ contribution-margin ratio. $120,000 fixed ÷ 30% = $400,000 of revenue to break even. (No code section.)

Liquidity: current ratio = current assets ÷ current liabilities; quick ratio excludes inventory; working capital = current assets − current liabilities (a dollar amount, not a ratio). (No code section.)

Financial statements: balance sheet = snapshot, Assets = Liabilities + Equity; income statement (P&L) = performance over a period. (GAAP — no code section.)

Depreciation (straight-line): (cost − salvage) ÷ useful life; a non-cash expense; classify office/sales assets to G&A. (No code section.)

Cost buckets: Direct (traceable to one job) · Overhead (indirect construction cost across jobs) · G&A (runs the company — office rent, sales-vehicle depreciation). (No code section.)

Federal payroll deposits: schedule set by the lookback period, not headcount — ≤ $50,000 → monthly, > $50,000 → semiweekly; $100,000 one-day rule → next business day; < $2,500/quarter may pay with the return (IRS Pub. 15).

FICA: Social Security 6.2% each side (to an annual wage base), Medicare 1.45% each side (no cap), employer matches. FUTA = employer only, never withheld.

California EDD taxes: employer pays UI + ETT; employee's check funds SDI + PIT (Unemp. Ins. Code §§976, 984, 13020; DE 44).

Sales & use tax: contractor is generally the consumer of materials and pays tax on material cost; use tax captures out-of-state purchases (R&T §6001 et seq.).

State entity tax: $800 minimum franchise tax (corporations) / $800 annual LLC tax plus an income-based LLC fee (R&T §17000 / §23000 et seq.; FTB).

PACE: repaid as a property-tax assessment; solicitor owes ability-to-pay, disclosure, and §7159 duties (Fin. Code §22000 / §22680 et seq.; Sts. & Hy. §5898.20 et seq.; B&P §7159).

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Summary

Business Finances is only 15% of the exam but rated High difficulty, because it demands two skills at once: setting up arithmetic correctly and recalling tax rules precisely. The math half is business practice, not law. The single most important idea is that markup and margin are different — markup rides on cost, margin on price, so a 20% markup is only about a 16.7% margin, and pricing to a target margin means dividing cost by (1 − margin). Close behind is cost classification: direct job costs, indirect construction overhead, and company-wide G&A are three separate buckets, and sales-vehicle or office depreciation belongs in G&A. From those two foundations flow break-even, budgeting, the financial statements (balance-sheet snapshot vs. income-statement period, with Assets = Liabilities + Equity), the liquidity measures (current ratio, quick ratio excluding inventory, and working capital as a dollar figure), and cash management — where the hard lesson is that even a profitable job can run out of cash, and that over-billing can violate §7159.5 on consumer work.

The tax half is where real citations live. Federal payroll deposits run on a schedule set by the lookback dollar amount, not headcount; FICA is matched by the employer while FUTA is employer-only; and California adds four EDD taxes — employer-paid UI and ETT, employee-withheld SDI and PIT. Materials generally carry sales or use tax with the contractor as consumer, corporations and LLCs owe the $800 minimum, and arranging PACE financing pulls the contractor into home-improvement disclosure and suitability duties. Learn the math cold and keep the who-pays-what tax map straight, and this section turns from a trap into reliable points.

Key takeaways

• Markup ≠ margin. Markup is a percent of cost; margin is a percent of price. A 20% markup is ~16.7% margin; to earn a 20% margin, mark up 25% (price = cost ÷ 0.80).
• Sort costs into three buckets. Direct (one job), overhead (across jobs), and G&A (whole company) — and sales-vehicle/office depreciation is G&A, never direct cost.
• Break-even = fixed costs ÷ contribution margin. It is where revenue equals total cost, and not all overhead is variable.
• Two statements, two stories. Balance sheet = snapshot with Assets = Liabilities + Equity; income statement = profit over a period.
• Know the liquidity three. Current ratio (CA ÷ CL); quick ratio excludes inventory; working capital is a dollar amount (CA − CL).
• Cash ≠ profit. A profitable job can still fail on timing; over-billing can violate §7159.5 on consumer work, and under-billing finances the owner.
• Federal deposit frequency keys off the lookback dollar amount, not employee count (≤ $50,000 monthly, > $50,000 semiweekly; $100,000 next-day rule).
• FICA is matched; FUTA is employer-only. Social Security 6.2% each to a wage base; Medicare 1.45% each with no cap.
• California adds four EDD taxes: employer pays UI + ETT; the employee's check funds SDI + PIT.
• Contractor is usually the consumer of materials (pays sales/use tax on material cost), and corporations/LLCs owe the $800 minimum state tax.
• PACE is a property-tax assessment, not a bank loan, and the arranging contractor owes ability-to-pay, disclosure, and §7159 duties.

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Sources

Estimating, accounting, and financial-reporting topics in this chapter — markup vs. margin, cost classification, depreciation, break-even, budgeting, the financial statements, liquidity ratios, cash management, and over/under-billing — are standard business and construction-management concepts with no single California code section, and are presented as business practice rather than as statutory law. The tax topics below rest on official primary law and agency guidance.

• IRS Publication 15 (Circular E), Employer's Tax Guide — federal payroll-tax deposit schedules (monthly vs. semiweekly by lookback period; $100,000 next-day rule), income-tax withholding, and FICA (Social Security 6.2% / Medicare 1.45%) and FUTA (employer-only).
• Internal Revenue Code — federal employment-tax obligations underlying Publication 15.
• Cal. Unemployment Insurance Code § 976; § 984; § 13020 — California EDD payroll taxes: employer-paid UI and ETT; employee-withheld SDI and PIT.
• EDD, California Employer's Guide (DE 44) — mechanics and current rates for California payroll taxes.
• Cal. Rev. & Tax. Code § 6001 et seq. — California sales and use tax; the "contractor as consumer of materials" rule and use tax on out-of-state purchases.
• Cal. Rev. & Tax. Code § 17000 et seq.; § 23000 et seq. — California personal and corporate/franchise income tax; the $800 minimum franchise tax and LLC annual tax.
• FTB, Limited Liability Company guidance; FTB, Corporations guidance — $800 minimum tax, the income-based LLC fee, and first-year rules.
• Cal. Financial Code § 22000 et seq.; § 22680 et seq. — PACE program administration and PACE solicitor/contractor duties.
• Cal. Streets & Highways Code § 5898.20 et seq. — the contractual assessment (PACE) program authority.
• Cal. Bus. & Prof. Code § 7159 — home-improvement contract statute that PACE-financed home-improvement work must satisfy (see Chapter 5); its § 7159.5 rule that payments may not exceed the value of work performed underlies the over-billing discussion.
• CSLB, Law and Business Study Guide — official exam content outline (Section 2: Business Finances — cash management, budget and planning, taxes, financial reporting) and the section's sample questions on payroll-deposit frequency and cost classification.

Federal payroll rates (Social Security 6.2%, Medicare 1.45%, the $50,000 lookback and $100,000 one-day thresholds) are the stable figures from IRS Publication 15; the Social Security wage base and California's SDI, UI, and ETT rates are adjusted annually and should be confirmed against the current-year IRS Pub. 15 and EDD DE 44 before relying on a specific dollar figure.