California Garment License for Out of State Companies

Refresher: Anyone manufacturing sewn products and clothing in the state of California needs to pay a fee and pass a test to be granted a special license. It doesn’t matter if you’re working out of your home and don’t even own a sewing machine. It doesn’t matter if you’re producing items for pets or technical applications rather than people. If either you or your vendor needs a sewing machine to make your product, you need a license.

From a posting of one of our members, I was surprised to learn that anyone using a California contractor also needs a license. I interviewed a woman I’ll call Amelia -a resident of Utah- about how she learned of it and how she went about getting her license. First a little bit about her.

Amelia has always loved fashion but she never went to school for it. Her dad wanted his daughters to be able to support themselves so he strongly encouraged technical education. No slouch himself, he has degrees (5) in electrical and mechanical engineering, history, meteorology and an MBA. So, although she was awarded a scholarship at the prestigious Art Institute of Chicago, Amelia majored in math. After several years working as an encryption analyst for an engineering firm, she decided to try her first love -fashion. She’s been at it about three years now and has recently launched a second line. For the first two years she was manufacturing in China but decided she wanted to do it domestically (topic for another entry). That’s how she came to discover the licensing problem in California. Also, she stresses that she thinks this is a terrific industry and the last thing she’d want to do is discourage anyone.


She found out about the licensing requirement due to a bad experience that happened to a friend of hers. Her friend (a resident of California) was working out of her home with an assistant. There they made patterns and a few samples. Production was jobbed out to vendors. Her friend found out she needed a license after a state auditor came to her house; the location listed as the place of business. That’s when she found you can’t sew in a residence or even hire someone to sew for you out of their home. Worse, not only did she need a license but her assistant did too because she was working under 10-99. Her friend was told she needed to have a separate location for the business with a separate mailing address. All told, she was facing penalties of eight thousand dollars. The fines were later reduced to $1,500 because the auditor could tell she was really trying but she was placed on probation and had to put five thousand dollars in an escrow account for three to five years. Pending future audits, she’ll get the money back.

Based on her friend’s experience, Amelia -again, a non-resident- asked around to see if she’d need a license because she used a contractor in California (she has another contractor in TN). She was told she did need one but she couldn’t find out any information about it. Amelia says the website was very frustrating and not helpful for “foreign entities”. She thinks the state should do more to facilitate out of state licensing.

She strongly recommends to fill out the paperwork first. You’ll have to pay everything up front ($25 testing fee and $750 for the license). Always keep the number you’re assigned handy. I’ve heard that over and over again so I guess it’s a big deal. She says the clock starts ticking from the date of application; you have 90 days to take the test.

Testing
She says the test isn’t hard. They send you four large booklets and an employment poster. The test is very pro-employee; you must know employee rights. The test will try to trick you up a bit but if you understand the philosophy behind it, you’ll do okay. You have to know employment rules, who is underage, how wages are calculated (some math involved), how often you must pay, and how many days you have to supply someone their check after their last day. She says she passed the first time but some people there were taking it for the second or third time -many because they didn’t renew on time so their licenses lapsed. You will get a notice by mail, seven to ten days later telling you whether you passed or failed.

You have the choice of taking the test in Los Angeles or San Francisco. If you’re from out of state, she recommends selecting LA. The reason is that the Secretary of State office is three blocks away, and you can go over there for the rest of the day to finish up other paper work (later). The test is given every Friday at 9 AM. Come early! There’s only so many seats available. If all the seats are taken, you have to come back another day, a problem if you’re from out of state. Do not show up for testing without that letter, otherwise you’ll have to pay an additional $25 fee. Only money orders are accepted so it’s not as though you can write a check on the spot. Speaking of pressure, Amelia was in line with a guy who had to pass. The state was holding his products and he was frantic about getting the goods to his customers. If you’re found operating without a garment registration number, they’ll shut you down till you get one.

Foreign Entities
Again, Amelia says much of the application information only applied to CA residents so it was confusing. She ended up expediting matters by having her CPA contact the Secretary of State’s office to clear it all up. She had to go through the complete requirements list and indicate what didn’t apply as a foreign entity. Some things that didn’t apply were “must be in good standing with the state of CA”. Rather, she had to be prove she was in good standing with her state of residence -getting a certificate from UT- and had to file this in CA to register as a foreign entity. There’s a separate fee to file for this in California; the online information wasn’t good. There it said eight hundred dollars. She says the actual fee was $100, plus a $25 processing fee. She also had to supply articles of incorporation to prove she was not incorporated in CA.

Other things that didn’t apply was requiring that one have a separate business address and most of the tax issues such as a quarterly filing report and worker’s comp insurance. She did not need a worker’s compensation certificate or public health license. The matter of “policy declaration binder, information page, annual rating endorsement, for payroll is not acceptable” does not apply. Good thing too, it sounds complicated. Lastly, you will have to file an IRS 8821 (pdf) so that the IRS can confirm you’re also in good standing with them. This can be faxed to California to complete your foreign entity registration.

In summary, even if you’re living out of state but you’re using a California contractor, you need a license. Your contractor is required to keep your license information on file. It’s possible that Amelia’s friend was audited because her contractor was audited and they didn’t have a number for her. I’m sure said contractor was levied a fine for failing to have it.

Caveat for in-state residents:
Read the definition of manufacturer and contractor carefully. If you do all your production in-house (separate business location is required) you may be a contractor. The license for a contractor is only $100. A manufacturer is the party who is contracting to have the garments made.

Further complicating matters, if you are sewing for profit, have no employees other than yourself, do all of your own work, and do not contract anything (even including dyeing or embroidery) out, you may not need a license. If you’re selling your own stuff you most likely don’t. If you’re producing it for someone else to sell such as in a private label agreement, you’re technically a contractor and need a license. Your client does too; their contracting with you to produce makes them a manufacturer.

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36 comments

  1. Oh my god. Does anyone know if one needs a license to use a pattern maker in California, even if they don’t do any production? Or even sample making?

    I will call them directly tomorrow to find out – they only answer their phones M, W, and F.

    BTW – is this true of any other states that people know about?

  2. dieter says:

    I’m right there with you Marguerite! I assume these measures are in place to help stem employee abuse, but they need to find a way to make this easier. This must make it tough for companies like the Evans Group to do business outside the state. How do they navigate this tape?

    dieter

  3. Lisa Bloodgood in Portland says:

    Yikes!! I hope my aunt has her act together. She sews all her own stuff and sells it, so she might not have to have a license, but I still hope she’s got it together.

    If you’re in Oregon, you don’t need a license for sewing (I hope I’m right because I’ve been doing this for a while), just file any DBA names with the state. If you’re in Portland or Multnomah County, you have to file with Portland for a business license (min. $100 fee) or an exemption (if you make less than $50,000 annually). Either way, you have to file a property return with the county. All of this is simple and fairly straightforward, which seems opposite of CA!!

  4. J C Sprowls says:

    NY also has a license. I haven’t researched it in any detail. But, the legislation is moving in the direction of CA – so, be aware.

    Other than that, most states are much easier to do business with. In CO you have to pay use tax on the depreciated value of your property and maintain both a business license and a reseller’s certificate. Sometimes zoning variances are needed. But, that’s about it.

    I’m not permitted to have employees in my home. But, that’s not because it’s a garment-related business. Only sole-operator business can be situated in a home. If I decide to employ stitchers, I need to move to a semi-industrial facility that meets health, parking and acessibility regulations. But doing so also means I need to comply with other state employment regulations re: benefits, provisions, etc.

    The physical entity of the business is what matters in the majority of states. Operating principles are left to management and are governed by the original agencies (i.e. OSHA, Wage & Hour, etc). Speaking of… who was asleep at these agencies when the CA employees were being abused, eh?

    As I understand it, there are garment industry regulations in Canada. The details of which I’m unclear about. But, I think those regulations are largely related to worker’s health and employment conditions. (They’re health nuts up that way)

  5. Ms. Max Schroder says:

    What an amazingly informative post!
    Thank you so much Kathleen for taking the time to outline every detail.

  6. Ok, can anybody answer this for me? My fabric supplier, pattern maker, and my dye house are in California, but all my cut and sew is done in Minnesota. I have all my ducks in a row for business licenses here in my state, but do I also need to get one for California?

  7. Kathleen says:

    My fabric supplier, pattern maker, and my dye house are in California, but all my cut and sew is done in Minnesota… do I also need to get one for California?

    I’m guessing that if your service provider needs a license, you do too. I don’t think your fabric supplier needs one but it’s likely your pattern maker does (if they do any sewing at all) and most likely your dyer. Can you ask them if they have a license?

    Off topic (nothing to do with April’s comment): I realize licensing is onerous for really small companies but believe it or not, small companies are more likely than large ones (who can’t hide as easily) to pay improperly or impose substandard working conditions on their workers. Small companies don’t have the resources or infrastructure to implement standards and established practices like larger enterprises. As any of us who’ve worked for small companies can attest, not all of them are as disciplined and ethical as all of you. Still, I wish CA could develop some kind of provisional program that wouldn’t impede smaller companies getting off the ground.

  8. Jim says:

    I just talked to Deputy Hermanez with the State of California. Yes you do have to have a license to bring designs, hire a contractor and do anything manufacturing related. When I asked her why they are penalizing the “client” bringing money and work to her state – she responded with – to protect our workers. So pony up the $750 bucks, take a test if you want to take your designs and have them made in California – even if its a few t-shirts….

  9. I used to live in LA and had a small line there. I encountered this same issue and had to take the test and get the license as well. This was about 10 years ago now, but I can easily recall that it was a very detailed and time consuming process. I passed the test the first time, but I studied my butt off. I don’t think I would have passed it if I hadn’t studied hard. I was suprised by how many people were also there taking the test on the same day and how many were taking it for the 2nd and 3rd time. The other thing I remember is that it was hard to get all the answers I needed to even get as far as understanding whether I even needed to take the test and other answers that were needed for the forms, etc… I just remember that I was so thankful when it was over. Then I moved to AZ and have been making everything myself. There is literally one contractor here and I’ve used him to do a few multiple runs of some items. But, I wasn’t sure if I needed to get a similar license in AZ. I haven’t been able to find anything like that here, so I’ve just been assuming that I don’t. Recently, I was going to go back to LA to contract out some work, but wasn’t sure if I needed that license again since I didn’t live there anymore. Thank you so much for posting this so I now know the answer.

  10. Molly says:

    So, if you live in another state you have to travel to CA to take the test? My business/design studio is in Las Vegas, but my clothing is being made in CA. Am I understanding this correctly?

  11. Mark C. says:

    Wow. I’m glad I got wind of this bad news now. This stuff is frustrating when all you want to do is produce good art. Oh well…

    Thanks for the post Kathleen.

  12. Molly says:

    I just wanted to add that my pattern maker/production manager is in Nevada. I write a check to her for production/supplies, etc. Since she has a CA garment license and is the one paying the contractor in CA she said I don’t need a CA garment license. I don’t know if this is true. I’m going to look into it further. But just thought I would throw it out there in case someone knows the answer :)

  13. Laura J says:

    I am so glad that I read this before I started production here in CA. I just filled out the forms and ponied up…cough cough….$775 (license plus test fees). All I can do now is wait until I get my test materials and take this test. I’ll keep you posted on if I pass or not!

  14. Emily Mack says:

    Hello everyone!

    I’m sorry for the delay of this response but it looks like many people have outstanding questions on if you need a manufactures license if you only use pattern makers, dye houses, etc. I’m the individual Kathleen interviewed regarding the out-of-state license (the above post) and I have a few comments regarding your additional questions. As far we my company knows – the license (for both instate and out of state companies) only applies to the actual construction of produced garments (i.e. the sewing process). We also have used a pattern maker in California before and there was no need for a license at that time. When reading through the licensing materials and taking the test – the overall tone was the actual manufacturing of the product. We also use a cutting facility in CA (which we absolutely love) and they never asked for a copy of our license and never mentioned that we needed one just for the cutting of our garments. My overall view of the license is that California is interested in protecting the employees of manufacturing/contact facilities (the actual sewing of apparel), many of the other facilities (cutting, dying, etc) use machines to do 90% of the work – not necessarily actually people so it could be a grey area. By the way – I completely sympathize with attempting to contact the DLSE. Who works a M, W, F schedule anyway? You may want to consider faxing in information as well – but overall if you want information, sometimes the easiest way it to “cough up” the $775 and get and ID number associated with you/your company (although I wouldn’t recommend submitting the money if you really don’t plan on getting a license – you won’t get it back). I hope this was a little helpful and feel free to contact me directly if you want to know additional information on what we had to do as an “out of state” company seeking a California Garment Manufacturing license.

    -Emily
    http://www.RedsandBluesCompany.com
    emack@RedsandBluesCompany.com

  15. designLA says:

    Right now I’m an importer, so it doesn’t apply to me, but the info about dying was helpful.

    Just a heads up,if you don’t have a license, and the contractor you sew at gets busted for labor abuses, you can be forced to pay a portion of the settlement to the workers, even if you have paid the contractor. Keep really detailed records. Po’s with your name, date, style #’s amounts, and have the contractor sign them. A labor lawyer at an FBI seminar said that rather than exposing their larger accounts to restitution, the contractor will turn in all their little accounts and lie and say that they made more goods than they really did , so the large account won’t get in hot water and pay a fine and restitution!! Totally shocking. I make everything in Asia, and I have considered manufacturing here, but as a small company , it just scares the daylights out of me.

  16. Bill Hood says:

    I have a friend who called me a few months ago from Oakland. He is a T-shirt printer, with no sewing machine. He is only a T-shirt printer.

    He received a visit from an inspector with the State of California looking for his garment manufacturing license. When he explained that he has been in business for 18-years and never had one or knew about it, they closed him down and forced his employees to go home. He was told that when he acquired the license, which could take 3 to 6 months because of the current backlog, he could reopen his business.

    He was told as long as he doesn’t have employees he can continue to screenprint and this is how he has managed to stay open. His production has been slowed to the point that he is barely able to keep up the equipment payments and if the license is not forthcoming soon, he may be forced to enter bankruptcy.

    He had a lawyer look into the matter and it is legal for the state to act in this matter. They are attempting to thwart the abuse of labor laws and the high number of forced labor shops in California.

  17. najah says:

    Wow oh my goodness!! I began to wonder why I was not able to locate anyone/business to sew for me. I can see a company needing a license, but me too, a test…? I wanted to do business here in the U.S. but I see now it seems discouraging. Anybody got any Asia connections?

  18. Mark C. says:

    Hi you guys,

    I just recently passed the exam. Believe me, the questions are no big deal at all. I didn’t even study; I simply read the study materials.

    If you read the materials, you’ll pass for sure. Good luck.

    @ Kathleen:

    By the way, Kathleen…I took the exam with our old (literally) buddy Seymour Jaron of S.J. Manufacturing–ha ha!

    When I’d arrived to take the exam I was told that I had to wait as there was one other person on their way. It was so funny to see Seymour stumble off the elevator and into the waiting room–Ha ha! He was loud (“I’M HERE TO TAKE THE TEST”) and his documents were very unorganized. Just thought I’d share; the sight was pure comedy–ha ha!!!

  19. Divina Wasyl says:

    Ok, got it-
    For now I will screenprint at home, have no employees, and will not contract out for anything, also I will sell directly to the customer at retail. This way I will not need to get a license.
    What if I want to wholesale my shirts to another company? Will wholesaling make me a contractor?

  20. yu says:

    if we contract clothes making to another state where garment license is not required, is it okay even if I live in california???? I feel so discouraged by all this. :(

  21. Kathleen says:

    I have an announcement, hope you can help this attorney who called me from the venerable Institute for Justice; it’d be to everyone’s advantage who works out of California. His email address has been omitted but is included here in the forum. If you are not a member but would like to respond, you can either call or snail mail him or email me and I will forward your response.

    Kathleen,

    Thank you so much for speaking with me about California’s garment manufacturing law this afternoon. As I mentioned when we spoke, we are conducting research for a series of reports on city and state regulations that create barriers for entrepreneurs in certain occupations. I would be very interested to hear from any of your members who have experienced problems because of California’s garment law. More specifically, I’d be interested to hear from anyone who’s been warned or cited by the government for not complying with the various requirements, such as the state certification requirement or the effective prohibition on working in your own home. I’d also be interested to hear from anyone who may be in compliance with the law now but who couldn’t comply when they were just starting out because of the economic, administrative, and other burdens the law imposes. Basically, I’d appreciate the opportunity to chat with anyone whose right to earn an honest living has been burdened by this law.

    The focus of the particular study I’m working on is Los Angeles, so I’d be really interested in hearing from folks there, but I’d welcome the chance to speak with others as well.

    Finally, I should mention that one of the main goals in preparing these reports is to illustrate the negative impacts that laws like these have on entrepreneurs and small businesses and to encourage state and local governments to revisit the laws so that people may be free to earn an honest living free from unreasonable government regulation.

    Thanks so much for your help, Kathleen!

    Michael Bindas

    Staff Attorney
    Institute for Justice Washington Chapter
    101 Yesler Way, Suite 603
    Seattle, Washington 98104
    phone: (206) 341-9300
    fax: (206) 341-9311

  22. Emma says:

    After reading the article, it confirmed that I should make it a goal to discourage anyone to enter the apparel industry in California.
    I have been in garment industry as a contractor for some time. I had to close the shop. Now I work independently as a consultant having no employees and machines to worry about. I do feel for Amelia who is confused. I am still confused. As government official puts it, laws protect no one, not workers, employers, most of all, the entire industry. Before closing the shop, one of my employees said that all regulations made it difficult for her to work. Isn’t is odd that a person who should be protected is crying out loud that they are not protected? She realizes that with all the regulations, her employer(s) are having tough time staying in business, which means no job for her at all. Here are the reasons why.

    Worker’s compensation – The insurance is extremely expensive for most of contractors. There is almost no regulation for this rate. This year, we were hit with 20% increase in fee and we had to lay off people to cut the cost. Secondly, many companies do not want to deal with this insurance. We had so many insurance companies not offering this product that we had to look out of state for the company offering work comp insurance. The last work comp insurance was based out of Colorado.

    Minimum wage – California is looking at another round of minimum wage increase next year. With every increase, I was forced to tighten my payroll. I had to lay off more people. Minimum increase does not mean increase in production prices from the designers. On the contrary, we were faced to take lesser profit for each production. My employee who commented about the laws, does not welcome minimum wage increase. She realized after few years that it means less than 40 hours of work for her, constantly working night jobs to make ends meet. Indeed, I did not have anyone as full time since I had to cut down my payroll.

    Garment Registration– I did not understand why Amelia had to worry about registration in California. She, as a Utah resident, should deal with her state only. The fact that she is in business in fear is incredibly sad. Why is it that an intelligent woman like Amelia has to find our laws confusing? If she finds it difficult, what makes the law makers to think ordinary person like me could fully understand our responsibility? There is a cloud of absurdity in law makers in California, especially when it comes to garment industry. If she had to file as foreign entity in California, my suggestion is to take it to China or other countries to make better profit. Of course, this means taking jobs elsewhere, but it is hard to believe our state government truly wants to help small businesses.

    Audits by independent firms– Retailers like JC Penny requires each companies to audit all their contractors every three months. This supposedly is an effort to protect workers. It protects no one but JC Penny. In the end, more honest auditor advised us that they want the book to be clean, nothing more. They realized it is is almost stupid to audit the proper way, which means no one would pass. Another question I would like to raise is the state is doing a decent job of auditing. I had a letter from the state commissioner not to produce any product for a label called Hype, Jonathan Martin. The reason was that they violate labor laws. Well, I still see their labels in major department stores. Why is it that department stores are not prohibited from purchasing products who violate laws????

    Abuse in the system– It is a well known fact and open secret that there are abuses in the industry. People expect kick backs from contractors in return for their works. Most manufacturers would turn their head the other way, and make sure that their productions comes out on time. We have seen this type of practice way too many times. There is absolutely no regulations for such practice which is happening too often.

    It is said and reported that Walmart is the biggest abuser of human rights in work force. Yet is is the biggest retail chain stores in the world. The problem of garment registration in California is a mirror of our industry as a whole. It does not make any sense that the worst violator in the apparel industry is the biggest in the world. It does not make any sense that the law that should protect workers are failing the industry. When we look at ourselves in the mirror, it will be in thousand pieces. Someone has to put them together. If and when someone does, we will see an image distorted, forever broken.

  23. Jill Homiak says:

    Of course now I see why Kathleen says not to produce in CA!!! It looks like for someone out of state, like myself, the cost would total about $1k.

    Based on this:

    Other things that didn’t apply was requiring that one have a separate business address and most of the tax issues such as a quarterly filing report and worker’s comp insurance.

    I’m wondering if the MANUFACTURER needs to get workers comp insurance???

    I guess the bigger question at hand is, in the long run, does it makes sense for your production to be in CA? Yes, it’s a hassle to do all this stuff up front, but if you find a great contractor, it could make the most sense!

  24. kathleen says:

    I’m wondering if the MANUFACTURER needs to get workers comp insurance???

    As the manufacturer Jill, depending on your state, the number of employees you have and who they are, you may need worker’s comp insurance just like any other business does.

    I agree it is worth the hassle of getting a manufacturer’s license in CA if you find a great contractor there. Make sure the party you hire has a contractor’s license just as they should ask you for your manufacturer’s license.

  25. Jill Homiak says:

    I should have made that question more specific. Would the workers compensation I get include the # of workers from the contractor side of things?

    That makes sense to get their license as well! Thank you.

  26. sfriedberg says:

    Jill, are you planning to buy out your contractor? Take over their payroll? Pay the employer’s share of Social Security and Medicare taxes? Take responsibility for their facility’s health and safety inspections? Provide pension or retirement benefits to their employees?

    I expect not. And if not, then you don’t need to provide workers compensation for your contractor’s employees, just people who work for you.

  27. Jill Homiak says:

    Thanks for the feedback! That makes sense. I still wonder how you can ensure that the contractor pays its employees….

  28. Teersa says:

    My business is in CA and I am wondering If someone submits a design to me online and I take that design, make a pattern, then hire a sewing contractor to make the garment, does the person who submitted the design need the garment certification?
    I was told, “anyone involved in the process” must have the license.

  29. Garrett says:

    I live in CA, but EVERY ASPECT my manufacturing, e-commerce, order processing, shipping, business operations are through a subcontractor in AZ. I have a business license, sole prop., in AZ and pay AZ sales taxes. I have no employees whatsoever in AZ or CA. The only thing happening in CA is me answering customer emails and monitoring inventory, accounting.
    Do I need a CA garment manufacturing license?
    If I incorporate in CA, and nothing else changes, NOW, do I need a CA garment manufacturing license?
    I think my situation is very similar to this:

    http://www.fashionapparellawblog.com/2011/05/articles/enforcement-of-fashion-laws/to-register-or-not-to-register-that-is-the-question/

    Any similarly situated businesses out there who can advise? Thank you!

  30. Kathleen Fasanella

    According to the regulations, you would need a license. That said, the case you cite is very interesting and I would agree that it amounts to “a welcome development” and I hope the regulations become less restrictive.

    The core problem is that enforcement in CA is all over the map. For example, one criteria is that people need a commercial location. It is the latter, not the cost of the license itself that is the biggest barrier ($2,000+ monthly rent as compared to $850 license fee annually). However, one member of our forum has successfully avoided this requirement. It is possible that owing to the economic climate and the drastic loss of jobs in apparel (they’re moving east) that there is some lightening of enforcement but it becomes a matter of luck as to which inspector one gets to approve their case.

    If you choose not to comply, the question is how much risk are you willing to assume. Your decision will be to not comply but to risk seizure of your business assets and or, bear the expense of a legal fight to get it back. Rock, meet hard place.

  31. Rich says:

    I am barely opening my sewing shop… i will hire around 3 employees to start.
    what are the EIN’s I need and how do i obtain them and are they necessary when i am barely beginning?
    CA city of commerce LA county

  32. Lauren says:

    I recently completed and received my garment manufacturers certificate.

    My question is this:
    I would love to contract with an out-of-state contractor for some cut and sewn work. Right now I’m using everything in state, with someone registered as a contractor.

    Do I have to make sure the out of state contractor is registered with California?

    It seems silly if it was a requirement, considering so much of the clothing contracted by California companies is sourced overseas, with questionable working conditions at best, but I thought I should ask the mind hive here.

    Thanks, Kathleen.

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