Laws, Regulations and Annotations


Business Taxes Law Guide – Revision 2023

Hazardous Substances Tax Annotations

Environmental (Corporation) Fee


Under the California Constitution, banks are subject to a tax on net income in lieu of all other taxes. Since the environmental fee (Health and Safety Code section 25205.6) is regarded as a tax, banks are exempt from it. However, nonfinancial subsidiaries of banks are not exempt. 7/30/91.

City-Owned Corporations

City-owned corporations which are within a Standard Industry Classification Code which has been found by the Department of Toxic Substances Control to be involved with hazardous materials are subject to the fee. 12/20/91.

Determining the Number of Hours Employees are Employed

Once a person is hired as an employee, the employer has control over how that employee spends the hours of the workday, including whether or not to grant paid time off during those workday hours for vacation, illness, and holidays and whether or not the employee must work his or her assigned hours on a particular workday. Therefore, for the purposes of the Environmental Fee statute and calculation of the number of employees "employed [in California] for more than 500 hours," the term "employed" includes the hours for which an employee is paid by the organization, even when the employee is absent due to vacation, illness, or holidays, for the duration of his or her employment. On the other hand, once the person is no longer employed by the organization … i.e., is no longer "engage[d], suffer[ed], or permit[ted] to work," the employer no longer "has … control [or] determination of the hours of work" of the employee. Therefore, any hours included in the calculation of a terminated employee's severance pay or sick or vacation time cash out should not be included when calculating the number of hours a person was employed during a calendar year for purposes of determining the Environmental Fee owed by the organization for that year. 3/21/06, affirmed and updated 8/14/12.

Federal Reserve Bank

Congress expressly exempted the Federal Reserve Bank from taxes, but waived the immunity of federal agencies from fees imposed by states with respect to hazardous wastes programs. The environmental fee is regarded as a tax, and the Federal Reserve Bank is therefore not subject to it. 11/24/92.

Identity of Employee

A property manager contracts with property owners to provide employees to maintain the properties. The property manager hires, discharges, pays, and supervises all employees and labor required for the operation and maintenance of the contracted properties. Even though there is a contract between the property manager and the property owner designating the property owner as the employer, the property manager and not the property owner is the employer under Health and Safety Code section 25205.6. 4/14/97.

Imposition of Fee on All Corporation SIC Codes

In order to impose liability for the fee, it is only necessary to show that the corporation has been assigned a Standard Industrial Classification (SIC) Code for an industry which the Department of Toxic Substances Control (DTSC) has determined is involved with hazardous materials (Health and Safety Code section 25205.6). It is immaterial that the specific corporation is not so involved. It is not the activity per se that triggers the imposition of the fee but rather the SIC Code assigned to the corporation. All technical decisions as to whether a material is hazardous are solely within the discretion of DTSC. 3/13/92.

Indian Reservations

In the absence of specific Congressional permission to subject Native Americans or their tribal corporations to the environmental fee, such tribal corporations are not subject to the fee. 7/3/92.

Instrumentality of State

A California non-profit corporation affiliated with a California State University, and as such, considered an instrumentality of the State by the Internal Revenue Service for federal income tax purposes, is nonetheless a separate and distinct California corporation for which there is no exemption from the environmental fee. 2/20/03.

Insurance Companies

The California Constitution exempts insurance companies from taxes other than the tax on gross premiums. The environmental fee is regarded as a tax; therefore insurance companies are exempt from it. 4/16/90.

Job Corps Center Operators and Service Providers

Job Corps Center operators and service providers are determined to be "federal instrumentalities" for purposes of the Environmental Fee. Under the United States Constitution, states are prohibited by the supremacy clause (art. VI, § 2) from imposing any tax on any activity, agency, or instrumentality of the federal government unless Congress expressly waives the federal government's sovereign immunity from state taxation under specific circumstances. California's Third District Court of Appeal concluded that the Environmental Fee imposed under Health and Safety Code section 25205.6 is a constitutionally valid "tax," not a fee, and there is no evidence in the law that Congress has waived federal immunity with respect to the Environmental Fee (i.e., tax). Accordingly, as federal instrumentalities, Job Corps Center operators and service providers are exempt from paying the Environmental Fee pursuant to the supremacy clause of the United States Constitution. 10/10/12.

Nonprofit Corporations

The environmental fee is imposed on every corporation regardless of nonprofit status if the corporation employs the requisite number of employees and is in a Standard Industrial Classification Code which the Department of Toxic Substances Control has determined is involved with hazardous materials (Health and Safety Code section 25205.6) 2/11/93.