Reference: California Form 593 instructions.

If you sell any asset in California on an installment contract, the BUYER has to withhold monthly on the principal payments he/she makes to you.  The buyer then sends the tax withheld to the Franchise Tax Board (FTB) EVEN IF YOU’E MOVED out-of-state. You, the seller, then file your annual tax return with CA to reconcile the amounts withheld with your actual tax liability (and often receive a refund of some of the backup withholding).

BUYER (not seller) is responsible for withholding CA tax from each payment.  The buyer must withhold the CA tax and file the Form 593 on monthly basis.

SELLER can elect to tax the entire CA gain in the year of sale.  If this election is made, the seller must make written request to the FTB.  Once the FTB approves the request, they will issue a letter releasing the buyer from withholding requirements.