An employer with quarterly wages of $125,000 must pay Employment Training Tax (ETT) to the EDD. If the ETT rate is 0.1% on the first $7,000 of each employee's wages and there are 10 employees, what is the quarterly ETT owed?
Correct Answer
A) $70.00
ETT is calculated on the first $7,000 per employee annually. For 10 employees: 10 × $7,000 × 0.1% = $70.00 annually. Since this is quarterly and assuming first quarter, the full $70 applies.
Why This Is the Correct Answer
ETT is calculated on the first $7,000 of each employee's wages per year (not per quarter). With 10 employees, the total taxable wage base is 10 × $7,000 = $70,000. Applying 0.1%: $70,000 × 0.001 = $70.00. The $125,000 in quarterly wages and the quarterly framing are distractors—the $7,000 wage cap is annual, not quarterly, and once accounted for, the math yields $70 for the year (and the full $70 is owed in the first quarter before any employee exceeds $7,000).
Why the Other Options Are Wrong
Option B: $175.00
$175.00 results from applying 0.1% to the full $125,000 quarterly payroll ($125,000 × 0.001 × 1.4 or some variation), ignoring the $7,000 per-employee cap entirely.
Option C: $700.00
$700.00 results from applying 0.1% to the full $70,000 taxable base—but then multiplying by 10 again, double-counting the employees. The wage base already accounts for all 10 employees.
Option D: $125.00
$125.00 likely comes from applying 0.1% to the total quarterly wages ($125,000 × 0.001 = $125), ignoring the $7,000-per-employee annual cap.
Memory Technique
ETT = 'Every Taxable dollar Tops out at $7,000' per employee per year. With 10 workers: 10 × $7,000 = $70,000 base. Then 0.1% of $70,000 = $70. The quarterly payroll amount is irrelevant noise.
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