2023 Tax Guide for Cannabis Businesses in California
Assembly Bill 195
Assembly Bill (AB) 195 (Stats. 2022, ch. 56) revised the Cannabis Tax Law. We will continually provide updates and additional information regarding your registration and return filing requirements in this guide along with future special notices.
The following notices include important information regarding the changes due to AB 195.
- Special Notice – Reminders for Cannabis Distributors
- Special Notice – Certain Cannabis Retailers May Apply to Retain Vendor Compensation
- Special Notice – New Responsibilities for Cannabis Retailers Beginning January 1, 2023
- Special Notice – Cannabis Tax Collection and Remittance Responsibilities for Distributors Ending
- Special Notice – Reminders for Cannabis Distributors and Retailers New Responsibilities for Cannabis Retailers Beginning January 1, 2023
- Special Notice – Cannabis Excise Tax Changes Beginning January 1, 2023
- Notice – Revised Cannabis Tax Return Beginning with the July 2022 and Third Quarter 2022 Filing Periods
- Special Notice – Cultivation Tax Ends on July 1, 2022
- Cannabis Tax Fact – Cultivation Tax No Longer Applies
Cannabis Retailer Excise Tax – Beginning January 1, 2023, cannabis retailers will be responsible for collecting and paying the cannabis excise tax to the California Department of Tax and Fee Administration (CDTFA). A 15% cannabis excise tax will be applied to gross receipts of cannabis or cannabis products in a retail sale. All cannabis retailers and microbusinesses authorized to sell cannabis or cannabis products at retail will be required to register for a Cannabis Retailer Excise Tax (CRE) permit with us and must begin filing their CRE returns for filing periods starting January 1, 2023. CDTFA will automatically register licensed retailers based on the information received from the Department of Cannabis Control prior to January 1, 2023. If you are a cannabis retailer or microbusiness that needs a CRE account with us, and you were not automatically registered with us or acquired your DCC licensee after January 1, 2023, you can register with us through our online services beginning January 1, 2023.
For additional information about the new CRE program, please see our Special Notice – Cannabis Excise Tax Changes Beginning January 1, 2023
Cultivation Tax – Beginning July 1, 2022, the cultivation tax no longer applies to harvested cannabis entering the commercial market.
- Distributors and manufacturers are no longer required to collect the cultivation tax from cultivators.
- Cultivators who sell or transfer harvested cannabis to another licensee are no longer responsible for paying the cultivation tax to manufacturers or distributors.
- Any cultivation tax collected on harvested cannabis that enters the commercial market on or after July 1, 2022, must be returned to the cultivator that originally paid the cultivation tax. If a distributor or manufacturer is unable to return it to the cultivator, the manufacturer must pay the excess cultivation tax collected to the distributor, and the distributor must pay the tax to CDTFA as excess tax collected.
For guidance on cultivation tax collected on harvested cannabis that enters the commercial market on or after July 1, 2022 please see our Industry Topics under the Distributor, Cultivator, or Manufacturer tabs above and our Special Notice, Cultivation Tax Ends on July 1, 2022.
Cannabis Excise Tax Mark-up Rate Decrease – CDTFA determined the cannabis mark-up rate for the cannabis excise tax will be 75 percent for the period beginning July 1, 2022, through at least December 31, 2022, which is a decrease from the previous mark-up rate. We are responsible for calculating the mark-up rate every six months. The mark-up rate must be used by distributors to compute the average market price of cannabis or cannabis products sold or transferred to a cannabis retailer in an arm’s length transaction.
For more information on the cannabis excise tax mark-up rate, please see our Special Notice, Cannabis Mark-Up Rate Decreases to 75 Percent on July 1, 2022.
For current cannabis excise tax mark-up and cannabis tax rates, please see the Cannabis Taxes section of our Special Taxes and Fees rate page.
How to Use This Guide
Each section of this guide contains important information relevant to cannabis businesses. The Getting Started section provides key resources related to registration, filing returns, account maintenance, and other information cannabis business may need.
The Distributors section covers topics related to the general application of tax to purchases and sales by distributors.
The Retailers section covers topics related to the general application of tax to purchases and sales by retailers. It also has information on exemptions that retailers may qualify for and the exemption certificates required.
The Cultivators section covers topics related to the general application of tax to cultivators and processors, the available exemptions and the exemption certificates required.
The Manufacturers section covers topics related to the general application of tax to purchases and sales by manufacturers.
The Videos section contains videos with important information for cannabis retailers, distributors, cultivators, and manufacturers.
The Tax Facts section provides information on specific topics important to the cannabis industry.
Lastly, the Resources section provides links to useful information, including special notices web-based seminars, publications, statutory and regulatory information, and access to assistance from our Customer Service Representatives.
Please note that the general information provided is not intended to replace any law or regulation. This website summarizes the law and applicable regulations in effect when it was published. However, changes in the law or regulations may have occurred. If there is a conflict between this document and the law, decisions will be based on the law.
Get it in Writing
Our tax and fee laws can be complex and difficult to understand. If you have specific questions regarding this topic, we recommend that you get answers in writing from us. This will enable us to give you the best advice and will protect you from tax, penalties and interest in case we give you erroneous information.
Requests for written advice can be emailed to CDTFA or mailed directly to the CDTFA office nearest you.
For more details, please see publication 8, Get It in Writing!
If You Need Help
If at any time you need assistance with topics included in this guide – or with topics not included – feel free to contact us by telephone or email. Contact information and hours of operation are available in the Resources section.
If you have suggestions for improving this guide, please contact us via email.
Getting Started
Sales and Use Taxes
If you own a business in California that sells cannabis or cannabis products, you must register with us for a seller’s permit and regularly file sales and use tax returns.
In California, all retail sales of tangible personal property are taxable unless the law provides a specific exemption. The law defines tangible personal property as an item that can be seen, weighed, measured, felt, or touched. Cannabis and cannabis products are generally considered tangible personal property and without a specific exemption, sales of such property are subject to sales and use tax.
The Control, Regulate and Tax Adult Use of Marijuana Act of 2016, an initiative measure approved as Proposition 64 on November 8, 2016, provides certain sales of medicinal cannabis are exempt from sales and use tax in this state. For more information on how Proposition 64 affects your medicinal cannabis sales, please see the Retailers tab, under the heading, Certain Sales of Medicinal Cannabis Exempt from Sales and Use Tax.
Use tax may be due when you purchase taxable items without payment of California tax from an out-of-state vendor for use in California. You may also owe use tax on items that you remove from your inventory and use in California if you did not pay tax when you purchased the items.
To find out more about use tax, please visit our use tax webpage.
Cannabis Excise Tax January 1, 2018, through December 31, 2022
A 15 percent excise tax is imposed upon retail purchasers of cannabis or cannabis products. Through December 31, 2022, the excise tax is based on the average market price of the cannabis or cannabis products sold in a retail sale.
In addition to a seller’s permit, if you are a distributor, or microbusiness licensed to act as a distributor, of cannabis or cannabis products, you must register with us for a cannabis tax permit and regularly file cannabis tax returns through the reporting period ending December 31, 2022.
Cannabis Excise Tax Beginning January 1, 2023
For retail sales of cannabis or cannabis products made on and after January 1, 2023, cannabis retailers must collect the 15 percent cannabis excise tax (rate subject to change July 1, 2025) imposed on purchasers of cannabis or cannabis products based on gross receipts from the retail sale of cannabis or cannabis products.
In addition to a seller’s permit, if you are a cannabis retailer, or microbusiness licensed to act as a cannabis retailer, you must also register with us for a cannabis retailer excise tax permit and regularly file cannabis retailer excise tax returns.
Cultivation Tax Ends
Beginning July 1, 2022, the cultivation tax is no longer imposed to harvested cannabis entering the commercial market.
- Distributors and manufacturers are no longer required to collect the cultivation tax from cultivators.
- Cultivators are no longer responsible for paying the cultivation tax to manufacturers or distributors when cultivators sell or transfer cannabis to another licensee.
- Any cultivation tax collected on harvested cannabis + that enters the commercial market on or after July 1, 2022, must be returned to the cultivator that originally paid the cultivation tax.
- If the cultivation tax cannot be returned to the cultivator that paid it, a distributor must pay the excess cultivation tax collected to us (see our Industry Topics under the Distributor, Cultivator, or Manufacturer tabs for more information).
Registration
Register with us online for a seller’s permit, a distributor cannabis tax account (through December 31, 2022), a cannabis retailer excise tax account (after January 1, 2023), or add a business location to an existing account. Online registration is available 24 hours a day.
If you have an existing username and password, login to your online account. To register for a cannabis tax account under your existing online access, click on the More link under the I Want To section. Then select the Register a New Business Activity link under the Manage Business Activity heading and select Cannabis business activities to get started.
If you do not have a username and password, select Register a New Business Activity on our Online Services homepage and select Cannabis Business Activities to get started. The online registration system will prompt you to enter the required information.
If you have registration questions, please contact our Customer Service Center at 1-800-400-7115 (CRS:711).
In addition to registering with us for the required tax permit(s), you will also need to obtain the appropriate cannabis license(s) for your business. The Department of Cannabis Control (DCC) is responsible for licensing cannabis cultivators, manufacturers, distributors, retailers, microbusinesses, and testing laboratories.
You are also responsible for contacting your city and/or county government office for information on local licenses you may be required to obtain.
No Seller’s Permit Required – Obtain Certification Letter
If you do not sell tangible personal property in California, you are not required to hold a seller’s permit. However, to meet the commercial cannabis licensing application requirements, a certification letter must be provided to the licensing agency stating that a seller’s permit is not required. To receive a certification letter from us, please email us with the following information:
- Owner name,
- DBA,
- Business address,
- Contact name,
- Contact phone number, and a
- A description of your business activities
Upon receipt of your email, we will review your information and, if you provided sufficient information, we will mail a certification letter to the address provided. We will contact you if we need additional information.
Filing and Payments
Sales and Use Tax Return
If you sell cannabis or cannabis products, you are required to file regular sales and use tax returns to report your sales. If you have no taxable transactions to report, you are still required to file your sales and use tax return and report your activities to us.
- Sales and Use Tax Return Filing Deadlines – Find your filing due dates.
Distributor Cannabis Tax Return (January 1, 2018 – December 31, 2022)
As a distributor of cannabis or cannabis products, you are required to file your cannabis tax return with us online for reporting periods through December 31, 2022, to report the any amounts of cultivation tax or cannabis excise tax due. If you have no taxable transactions to report, you are still required to file your cannabis tax return for reporting periods through December 31, 2022, and report your activities to us. The cannabis tax return is due on the last day of the month following the reporting period. The last cannabis tax return is due January 31, 2023. The cannabis tax account is separate from other accounts you may have with us.
You can file your cannabis tax return and make payments onlin through our online services.
Visit our Tutorials page for instructions on how to file your Cannabis Tax return through our online services.
Cannabis Retailer Excise Tax Return Beginning January 1, 2023
As a cannabis retailer, you are required to file your cannabis retailer excise tax return with us online to report the amount of cannabis excise tax due for your sales transactions that occur on and after January 1, 2023. If you have no taxable transactions to report, you are still required to file your cannabis retailer excise tax return and report your activities to us. The cannabis retailer excise tax return is due on the last day of the month following the reporting period. The first cannabis retailer excise tax return is due May 1, 2023.
The cannabis retailer excise tax account is separate from other accounts you may have with us.
Once you register with us for a cannabis retailer excise tax account, you can file your return and make payments online through our online services.
Online Services
Whether you are new to operating a cannabis business or growing your existing business, you’ll find our online services helpful in maintaining your account.
- File a Tax Return Online – Our online filing service.
- Online Payment Options – Make payments online for tax and fee programs.
- Other Online Services Options By logging into your online account, you can:
- Amend your previously filed tax return
- View correspondences from us
- Request relief from penalties or interest
- File or manage an appeal
- File a claim for refund
- Add a location to your tax account(s)
- Update your business information
Cash Payments
If you are paying your sales and use tax or cannabis tax in cash, please contact one of our offices to make arrangements and explain that you need an exemption from our no cash policy.
We may grant an exemption if paying in cash is necessary to avoid an undue hardship. Our staff will provide you with form CDTFA-245-NC, No Cash Exemption Request. On this form you will need to describe the nature of your business and why you are unable to establish a bank account or pay by cashier’s check or money order. We will notify you in writing when your request has been approved or denied and will provide you with additional information on how to proceed.
If you receive approval to pay in cash, you must call your local office at least 21 days in advance for an appointment to make your payment. Please see our Cash Payment Instructions for more information.
If you have an estimated monthly tax liability over $20,000 for cannabis tax accounts or $10,000 for sales and use tax accounts, you may be required to pay any amounts due by electronic funds transfer (EFT). Receiving approval to pay in cash will exclude you from the EFT requirement. If you fail to pay those accounts electronically as required, on and after January 1, 2023, you will be subject to a 10 percent penalty of the taxes for that failure. However, if you believe you were assessed a penalty in error, you can request relief of the mandatory EFT penalty online.
For Retailers and Cannabis Deliveries/Dispensaries
We will continue to update this page as we receive information about the taxation requirements for the cannabis industry.
This guide is intended to provide general information regarding issues relating to the Sales and Use Tax Laws, Cannabis Tax Law, and other programs administered by California Department of Tax and Fee Administration (CDTFA) that may affect the cannabis industry. It is not intended to provide advice or guidance in relation to other state and local statutes and regulations relating to the cannabis industry. For information regarding California cannabis licensing please contact the Department of Cannabis Control. Additionally, for the Federal Government’s guidance regarding marijuana enforcement, see the U.S. Department of Justice website.
A cannabis retailer is a person required to be licensed by the Department of Cannabis Control to engage in the retail sale or delivery of cannabis or cannabis products to customers.
A microbusiness license authorizes the licensee to operate as more than one type of business as approved by DCC at the same licensed premises. A microbusiness that operates as a cannabis retailer is responsible for all the same requirements with us as a licensed cannabis retailer.
If you are a cannabis retailer or a microbusiness making retail sales of cannabis or cannabis products, you are required to:
- Register with us for a seller’s permit.
- Charge and collect sales tax on your taxable retail sales of cannabis or cannabis products.
- Report and pay use tax on taxable items purchased without payment of tax and used (for example items removed from your resale inventory and used).
- File your sales and use tax returns online and pay the sales and/or use tax to us.
- Collect the 15 percent cannabis excise tax from your customers who purchase cannabis or cannabis products.
In addition, you must also:
- Obtain a cannabis retailer license issued by the Department of Cannabis Control.
- Contact your city and/or county government office for information on local licenses you may be required to obtain.
- Maintain records
On and after January 1, 2018, through December 31, 2022, you are required to:
- Pay the cannabis excise tax that is due to your distributor for cannabis or cannabis products that were sold or transferred to you prior to January 1, 2023. Do not remit cannabis excise tax on your sales and use tax return.
- Provide each purchaser with an invoice, receipt, or other document which includes the statement: “The cannabis excise taxes are included in the total amount of this invoice.”
On and after January 1, 2023, you are required to:
- Register with us for a cannabis retailer excise tax account.
- Report and pay the cannabis excise tax to us for your retail sales transactions that occur on and after January 1, 2023.
- Provide each purchaser with an invoice, receipt, or other document that separately states the cannabis excise tax.
Cannabis Excise Tax (January 1, 2018, through December 31, 2022)
A 15-percent excise tax is imposed upon purchasers of all cannabis and cannabis products, including medicinal cannabis or cannabis products, sold in a retail sale. Distributors are required to calculate and collect the amount of excise tax due on the cannabis or cannabis products they sell or transfer to you through December 31, 2023. The 15-percent excise tax is calculated based on the average market price of cannabis or cannabis products sold in a retail sale. Please refer to the, Average Market Price heading below for more information. As a retailer, you are required to pay the cannabis excise tax to your distributor on cannabis or cannabis products sold or transferred to you through December 31, 2022, and collect the cannabis excise tax from your customers. You may not sell cannabis or cannabis products unless the cannabis excise tax is paid to you by the purchasers at the time of sale.
Cannabis Excise Tax Beginning January 1, 2023
On and after January 1, 2023, the responsibility for paying the cannabis excise tax to us shifts from distributors to cannabis retailers.
The cannabis excise tax currently remains at 15 percent and is based on gross receipts from the retail sale of cannabis or cannabis products. The 15 percent rate is subject to change on July 1, 2025.
- Gross receipts include the sales price of the cannabis or cannabis products, after discounts, and all charges related to the sale, such as delivery fees and any local cannabis business tax listed separately on the invoice or receipt provided to the purchaser.
- Gross receipts do not include sales tax or the gross receipts from the retail sale of any non-cannabis item.
Cannabis retailers are responsible for collecting the cannabis excise tax from purchasers at the time of the retail sale of cannabis or cannabis products. The cannabis excise tax must be listed separately on the receipt or invoice provided to the purchaser. The cannabis excise tax is included in gross receipts subject to sales tax.
Cannabis retailers must file cannabis retailer excise tax returns online and pay the cannabis excise tax collected from purchasers to us beginning with the first quarter of 2023 reporting period. The first cannabis retailer excise tax return is due May 1, 2023.
Industry Topics
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Sales
Your retail sales of cannabis and cannabis products are generally subject to sales tax, unless the purchaser provides you with a valid Medical Marijuana Identification Card issued by the California Department of Public Health indicating they are a qualified patient or the primary caregiver for a qualified patient, along with a valid government-issued identification card. Please refer to the Certain Sales of Medicinal Cannabis Exempt from Sales and Use Tax heading below for more information.
Cannabis Accessories (January 1, 2018, through December 31, 2022)
The retail sale of cannabis accessories, such as pipes, rolling machines, vape pens (without cannabis), rolling papers, shirts, hats, books, and magazines are subject to sales tax, but not the 15-percent cannabis excise tax when the sales price of the cannabis or cannabis products is separatedly stated.
Sales Tax Reimbursement
Although a retailer has the option to collect sales tax reimbursement from its customers. It is not mandatory. As a retailer, you are liable for the sales tax on your taxable sales, and you must report and pay the sales tax to us.
Cannabis Excise Tax Beginning January 1, 2023
The cannabis excise tax currently remains at 15 percent and is based on gross receipts from the retail sale of cannabis or cannabis products. The 15 percent rate is subject to change beginning on July 1, 2025.
- Gross receipts include the sales price of the cannabis or cannabis products, after discounts, and all charges related to the sale, such as delivery fees and any local cannabis business tax listed separately on the invoice or receipt provided to the purchaser.
- Gross receipts do not include sales tax.
Cannabis retailers are responsible for collecting the cannabis excise tax from purchasers at the time of the retail sale of cannabis or cannabis products. The cannabis excise tax must be listed separately on the receipt or invoice provided to the purchaser. The cannabis excise tax is included in gross receipts subject to sales tax.
Cannabis retailers must file cannabis retailer excise tax returns online and pay the cannabis excise tax collected from purchasers to us.
Example of Tax Computation Beginning January 1, 2023
The following is an example of how the cannabis excise tax is calculated for retail sales transactions that occur on or after January 1, 2023, along with how sales tax is calculated.
For this example, the selling price for of a cannabis product is $35.00. You deliver the item to the purchaser with your own vehicle and charge a $5.00 delivery fee. This example also assumes an 8.5 percent sales tax rate and a 10 percent business tax which you separately state on the receipt to the purchaser. Both the cannabis business tax and delivery fee in this example are subject to the cannabis excise tax and sales tax.
Excise tax calculation:
The cannabis excise tax applies to the subtotal of $43.50, making the excise tax of $6.53 due for this example.
Taking this example a step further, we can now calculate the sales tax for this transaction. Gross receipts for purposes of calculating the sales tax include the cannabis excise tax. Therefore, the subtotal of $43.50 and the cannabis excise tax due of $6.53 are added to calculate the gross receipts subject to sales tax.
Sales tax computation:
The sales tax applies to the subtotal of $50.03, making the sales tax of $4.25 due for this example, and the total amount due from the purchaser is $54.28.
This is just a sample scenario. Different sales tax and cannabis business tax rates may apply to your transactions, and you must use the rates in effect at the time of sale.
Cannabis Excise Tax Collection (January 1, 2018 – December 31, 2022)
The cannabis excise tax is imposed on the purchaser of cannabis or cannabis products. As a retailer, you are required to collect the cannabis excise tax from your customers at the time of the retail sale of cannabis or cannabis products.
Average Market Price (January 1, 2018 – December 31, 2022)
A cannabis excise tax applies to the average market price of cannabis or cannabis products sold in a retail sale. The average market price is determined by the type of transaction (either “arm’s length” or “nonarms’ length”) that occurred when the seller (cultivator, manufacturer, or distributor) sold the product to you.
Arm’s Length Transaction (January 1, 2018 – December 31, 2022)
An “arm’s length transaction” is a sale entered into in good faith, between the cannabis retailer and its supplier at a sales price that reflects the fair market value in the open market between two informed and willing parties, neither under any compulsion to participate in the transaction. In an arm’s length transaction, the average market price means the average retail price determined by the wholesale cost of the cannabis or cannabis products sold or transferred to you, plus a mark-up.
Nonarm’s Length Transaction (January 1, 2018 – December 31, 2022)
A “nonarm’s length transaction” is a transaction that does not meet the definition of an “arm’s length transaction.” In other words, the transaction is not a sale to a cannabis retailer that is entered into in good faith and that reflects fair market value in the open market. One example of a nonarm’s length transaction would be when a distributor sells cannabis to a cannabis retailer at a sales price that is lower than what the same distributor offers to other cannabis retailers and, which does not reflect the fair market value.
Mark-up Rate (January 1, 2018 – December 31, 2022)
Distributors use a mark-up rate to compute the average market price of cannabis and cannabis products sold or transferred to a cannabis retailer in an arm’s length transaction. The mark-up rate is not intended to be used to determine the amount for which you sell your cannabis and cannabis products. You may use any mark-up you would like to establish your selling price.
Cannabis Excise Tax and Sales Tax Computation (January 1, 2018 – December 31, 2022)
The cannabis excise tax is 15-percent of the average market price of cannabis or cannabis products sold in a retail sale and the sales tax is based on your gross receipts. The examples below provide sample scenarios and guidance on how the cannabis excise tax and sales tax due are computed.
California Cannabis Track-and-Trace
As provided in the Industry User’s Guide for the California Cannabis Track-and-Trace Metrc system (Metrc User’s Guide), a distributor licensed to sell or transfer cannabis or cannabis products to a cannabis retailer is required to use a wholesale manifest transfer in the California Cannabis Track-and-Trace (CCTT) system. When a wholesale manifest is used, the distributor is required to record the retailer’s wholesale cost of each package in the transfer. When a nursery sells or transfers immature plants or seeds to a cannabis retailer, it is recommended in the Metrc User’s Guide that the nursery use a wholesale manifest in the CCTT system and record the retailer’s wholesale cost of the immature plants or seeds. For clarity, we recommend that you also indicate the unit of measure for each of the items included in the package.
Receipts for Cannabis Excise Tax Paid to Cannabis Retailers (January 1, 2018 – December 31, 2022)
Each cannabis retailer is required to provide a purchaser (retail customer) of cannabis or cannabis products with an invoice, receipt, or other similar document that includes the following statement:
Excess Cannabis Excise Tax Collected (January 1, 2018 – December 31, 2022)
When a cannabis retailer collects more cannabis excise tax from its purchaser than the retailer is required to pay to a distributor, the retailer collected excess cannabis excise tax. Excess tax is charged when tax is computed on a transaction that is not subject to tax, when tax is computed on an amount in excess of the amount subject to tax, when tax is computed using a tax rate higher than the rate imposed by law, or when a mathematical error results in an overstatement of the tax on an invoice, receipt or similar document. When this occurs, the retailer shall return the excess cannabis excise tax collected back to the retail customer. In the event the retailer cannot or does not return the excess cannabis excise tax collected back to its customer, the retailer is required to pay the excess cannabis excise tax collected to a distributor for the distributor to pay to us.
Losses Due to Theft
You are required to pay sales tax and cannabis excise tax on all taxable sales despite the loss of cash due to theft. The cannabis excise tax is imposed on cannabis or cannabis products sold at retail. Therefore, if cannabis or cannabis products are stolen from a retailer, the cannabis excise tax may not be owed.
Sales of Cannabidiol (CBD) Products
CBD products that contain cannabis are subject to the cannabis excise tax. CBD products which are derived from industrial hemp plants and do not contain cannabis are not subject to the cannabis excise tax, even if the CBD product contains trace amounts of Tetrahydrocannabinol (THC).
Free Cannabis
As a cannabis retailer, you are prohibited from giving away any amount of cannabis or cannabis products unless authorized to do so.
Cannabis Trade Samples
California law allows certain cannabis licensees to provide and receive cannabis or cannabis products trade samples (cannabis trade samples). As a cannabis retailer, you can receive cannabis trade samples from cultivators, manufacturers, distributors, and microbusinesses authorized to engage in cultivation, manufacturing, or distribution, but you cannot designate cannabis or cannabis products as trade samples and provide cannabis trade samples to other licensees or consumers. The cannabis excise tax does not apply to cannabis trade samples.
Donated Medicinal Cannabis
Beginning March 1, 2020, California law provides that a cannabis retailer may provide free medicinal cannabis or medicinal cannabis products (medicinal cannabis) to medicinal cannabis patients or their primary caregiver. When you, as a retailer, donate free medicinal cannabis to a medicinal cannabis patient or their primary caregiver, the cannabis excise tax and use tax do not apply.
Discounted Sales
There may be times when you run a promotion that discounts the selling price of a cannabis or cannabis product, including, deep discounts or two for the price of one discounts. The cannabis excise tax and sales and use tax still apply to sales of discounted cannabis or cannabis product.
Collectives/Cooperatives
Cannabis Excise Tax:
The Cannabis Tax Law provides that any person required to be licensed as a cannabis retailer by the Department of Cannabis Control, must collect the cannabis excise tax from a purchaser and for a person required to be licensed as a distributor by the Department of Cannabis Control to collect and pay to us any cannabis excise tax due on cannabis or cannabis products sold or transferred to a cannabis retailer before January 1, 2023.
Certain Sales of Medicinal Cannabis Sales Exempt from Sales and Use Tax
The sales and use tax exemption applies to the retail sales or the storage, use, or consumption in this state of medicinal cannabis or medicinal cannabis products, as those terms are defined in the Business and Professions code section 26001. To obtain the exemption, qualified patients or their primary caregiver must furnish their valid Medical Marijuana Identification Card (MMIC) issued by the California Department of Public Health and a valid government issued identification card (ID) at the time of purchase.
Consignment Sales
You are responsible for obtaining a seller’s permit and reporting and paying the sales tax on the retail selling price of consignment sales.
Special Events (January 1, 2018, through December 31, 2022)
The Department of Cannabis Control (DCC) provides that only licensed retailers or microbusinesses authorized to sell cannabis to retail customers may sell cannabis or cannabis products at a special event. The cannabis excise tax and generally the sales and use tax apply to any retail sales of cannabis or cannabis product.
Purchases
When you purchase a product that will be resold, you can purchase it without paying sales or use tax by providing the seller a valid and timely resale certificate. Sales tax will apply when you sell the product at retail. However, when you purchase a product for resale without paying sales tax but, instead of selling it, you consume or use the product, then you owe the use tax based upon the amount of the purchase price.
Local Government Cannabis Business Taxes
Some cities have enacted measures requiring that cannabis businesses located in their jurisdictions pay a cannabis business tax. If you add a separate amount to your customers’ invoices or receipts to cover your cannabis business tax, sales tax applies to the business tax amount.
Record Keeping
You are required by law to keep business records so that we may verify the accuracy of your sales and use tax return and determine how much tax is due, when a return has not been filed.
Refunds
If you have collected and remitted more tax than the amount due, you can request a refund of the overpayment.
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