QB Issue Resolution:

I would check with your accountant. My guess is if they work in California then California taxes need to be withheld.

You’d have to register with the state if required.

Resolution for Issue 'If my business is located in Indiana, and I am hiring a resident of California, what taxes are taken out of this employee’s paycheck?' available: Yes (Solved).
Source: Intuit Community forum.

If my business is located in Indiana, and I am hiring a resident of California, what taxes are taken out of this employee’s paycheck?: this issue or error code is a known issue in Quickbooks Online (QBO) and/or Quickbooks. Support for this issue is available either by self-service or paid support options. Experts are available to resolve your Quickbooks issue to ensure minimal downtime and continue running your business. First try to resolve the issue yourself by looking for a resolution described below. If it is a complex issue or you are unable to solve the issue, you may contact us by clicking here or by using other support options.

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