California Cannabis Advisors
LLCalifornia Cannabis Advisors Grey Black.jpg

Industry News

INDUSTRY NEWS

Cannabis excise vs. cultivation taxes in California

California’s cannabis laws offer new opportunities for businesses, but two new taxes as well. We break down the cannabis-specific tax types, along with which tax your business will be responsible for collecting. 
 

beatriz-perez-moya-111685_preview.jpeg

California’s cannabis laws offer new opportunities for businesses, but two new taxes as well. We break down the cannabis-specific tax types, along with which tax your business will be responsible for collecting. 

Seller's permit

If you sell cannabis or cannabis products, the first order of business is to register with the California Department of Tax and Fee Administration (CDTFA) for a seller's permit. This includes cannabis cultivators, processors, manufacturers, retailers, microbusinesses and distributors. In addition to obtaining a seller's permit, you'll be responsible for regularly filing sales and use tax returns. 

While this is not unique to cannabis businesses (all entities who engage in business in California are required to obtain a seller's permit and file sales and use tax), it's still an important box to check before you get going. 

Cannabis excise tax

One of the two brand new taxes is the cannabis excise tax. The cannabis excise tax is collected by retailers and is designed to be paid by consumers. This 15 percent tax is collected at the point of sale, and retailers forward this tax to their distributor. The distributor, then, is the business ultimately responsible for filing and paying cannabis excise tax to the CDTFA.  

Cannabis cultivation tax

Another new tax, the cannabis cultivation tax, is paid by cultivators to either a distributor or manufacturer (depending on the nature of the transaction). The tax rates vary based on which plant parts are sold. They break down like the following:

  • $9.25 per dry-weight ounce of cannabis flowers
  • $2.75 per dry weight ounce of cannabis leaves

As with the cannabis excise tax, the cannabis cultivation tax is paid to the CDTFA by distributors. 

A note about sales tax

In addition to obtaining a seller's permit, your cannabis business will be responsible for filing and paying any sales and use tax due to the CDTFA. If none of your sales are subject to sales tax (which will be the case if your buyer, such as a distributor or retailer, presents a valid resale certificate), you'll still need to file a return indicating you made no taxable sales in the specified time frame.

CONTACT CCA TODAY TO MAKE SURE YOU'RE READY FOR THE TAX REGULATIONS GOING INTO EFFECT ON JANUARY 1, 2018. 

Sources:

Monica Beyer