If you’re starting a cannabis business in California, it doesn’t take long to notice the string of laws and regulations that make operating in this industry unbelievably complex. Unfortunately, new tax laws on state and local levels only contribute to this confusion. But, adapting to California’s tax laws for 2018 and properly managing your books is imperative to your business’ compliance with the state and your local government.
To help you stay up-to-date with new tax laws and keep your business compliant, here are the most important updates to California’s Cannabis Tax Laws.
There are 2 cannabis-related taxes coming out of California’s latest regulations:
- Cultivation Tax
- Cannabis Excise Tax
Cultivation taxes only apply to licensed cannabis cultivators in California. Cultivators are required to pay a tax of $9.25 per dry-weight ounce of cannabis flowers and $2.75 per dry-weight ounce of cannabis leaves to their distributor or manufacturer.Cannabis Excise Tax
The Cannabis Excise Tax applies to all cannabis purchases from commercial retailers. Every time cannabis is exchanged for currency, including medical cannabis, a 15% excise tax applies.
Keep in mind that both of these taxes are state taxes only. The taxes above do not include any taxes levied by local governments.
Local sales tax also comes into play at the time of sale for a cannabis product. Sales tax varies from county to county, so it’s important that your business is using the proper tax code for your area. In addition, local sales taxes only apply to recreational sales and cannot be levied on medical marijuana patients.
3rd party inventory management and point-of-sale software companies like WebJoint
aim to simplify the tax management aspect of your business. WebJoint recently installed a feature that allows business operators to input their local tax codes and apply the proper taxes for any transaction.How Are Taxes Collected?For Cultivators
The only state mandated tax cultivators need to worry about is the Cultivation Tax. This tax will be collected by the Cultivator’s licensed distributor. Depending on local laws and regulations - local growing taxes may be applied as well. If your city levies local grow taxes, the tax will be paid directly to the city.For Retailers
For adult-use retailers, the 15% Cannabis Excise Tax and Local Sales Tax will be collected from the customer at the time of sale. For medical retailers, only the 15% Cannabis Excise Tax will be collected from the customer at the time of sale. For both adult-use and medical retailers, the Cannabis Excise Tax will be collected by the licensed distributor. Local Sales Taxes will be paid to the city by adult-use retailers.For Distributors
Distributors will be the main tax collector for the cannabis industry. After collecting the Cultivation Tax from cultivators and the Cannabis Excise Tax from retailers, distributors must file sales and cannabis tax (Cultivation + Excise) separately with the California Department of Tax and Fee Administration (CDTFA). These taxes must be filed at the end of every month following a reporting period.
Keeping track of the right taxes your cannabis business is responsible for paying is incredibly important to your compliance. If you are looking for a compliance softwared don't hesitate to contact our friends at WebJoint.com
____________________________________________DISCLAIMER: The materials made available on this post are for entertainment purposes only and not for the purpose of providing legal advice. You should contact your cannabis attorney to obtain advice with respect to any particular issue or problem!