So….California Cannabis Taxes Are Coming January 1

Cannabis taxesInformation from California Department of Tax and Fee Administration:

Beginning January 1, 2018, harvested cannabis is subject to a cultivation tax, and both cannabis and cannabis products are subject to a cannabis excise tax. As a cannabis business, it is important you are aware of the new tax rates, how these taxes apply to your business activities, and your registration requirements.

What are the cultivation tax rates and who pays the tax?

The current cultivation tax rates are:
$9.25 per dry-weight ounce of cannabis flowers [$148 per pound], and $2.75 per dry-weight ounce of cannabis leaves [$44 per pound].

Additional categories and rates may be specified at a later date in regulations and will be posted on our website.

The cultivation tax applies to all harvested cannabis that enters the commercial market. Cultivators are responsible for paying the cultivation tax to the distributor or to the manufacturer if the first transfer or sale of unprocessed cannabis is to a manufacturer. Manufacturers who collect the cultivation tax are required to pay the tax to the distributor. The distributor reports and pays the cultivation tax to the California Department of Tax and Fee Administration (CDTFA).

What is the cannabis excise tax rate and who pays the tax?

The cannabis excise tax is imposed upon purchasers of all cannabis and cannabis products at a rate of 15 percent of the average market price when purchased at retail. Retailers are responsible for collecting the cannabis excise tax from purchasers at the time of the retail sale and for paying the tax to the distributor. The distributor reports and pays the cannabis excise tax to the CDTFA.

How is the average market price determined?

  • When the sale to the retailer is an arm’s length transaction, meaning the consideration received reflects the fair market value between two parties under no requirement to participate in the transaction, the average market price is the wholesale cost of the cannabis or cannabis products sold or transferred to the retailer, plus a mark-up predetermined by the CDTFA (see heading below).

o The wholesale cost is the amount paid by the retailer for the cannabis or cannabis products, including transportation charges and adding back in any discounts or trade allowances. In an arm’s length transaction, the excise tax is not based on the retailer’s gross receipts.

  • When the sale or transaction is not at arm’s length, the average market price is the cannabis retailer’s gross receipts from the retail sale of the cannabis or cannabis products.

What is the mark-up rate on wholesale cost?

The current mark-up rate as set by the CDTFA is 60 percent for all cannabis and cannabis products.

CDTFA is required to determine the mark-up rate every six months. The rate will be posted on our website.

How does the distributor report and pay cultivation and cannabis excise taxes to CDTFA?

  • Distributors must register with the CDTFA for a cannabis tax permit to report and pay the cultivation tax and cannabis excise tax to the CDTFA.
  • A microbusiness licensee is licensed to act as a distributor, among other things, and must comply with all the same requirements as a distributor.

How does sales tax apply?

  • Sales and use tax applies to retail sales of cannabis and cannabis products, but does not apply to sales of medicinal cannabis and cannabis products where a purchaser provides his/her Medical Marijuana Identification Card issued by the California Department of Public Health and a valid government identification card.
  • Gross receipts from the sale of cannabis and cannabis products for purposes of sales and use tax include the excise tax.
  • Cannabis retailers, cultivators, manufacturers, and distributors making sales must register with the CDTFA for a seller’s permit to report and pay any sales and use tax due to the CDTFA. If you already have a seller’s permit that was issued by the Board of Equalization (BOE), it is not necessary to re-register for a seller’s permit with the CDTFA.
  • It is important that you timely obtain a valid resale certificate that is accepted in good faith from the purchaser if you make sales for resale.
  • Current sales and use tax rates can be found on our website.

When may I register my cannabis business?

Beginning November 20, 2017, you can register for all the proper tax permits for your cannabis business on our website. From the CDTFA homepage, click the Register link, and follow the prompt. When registering your business activity, make sure to select box number 3, Cannabis business activities.

Where can I get more information?

The information provided here is general. The tax law can be complicated and there are very specific requirements for the cannabis industry. Read our Tax Guide for Cannabis Businesses for helpful information on a variety of topics including: registration, invoicing requirements, tax exemptions, recordkeeping, calculation of the tax due with examples, and other important resources.

If you have additional questions, you may call our Customer Service Center at 1-800-400-7115 (TTY:711), Monday through Friday, 8:00 a.m. to 5:00 p.m. (PST), except state holidays.

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66 comments

  • When ALCOHOL was re-legalized, taxes were LOWERED in order to encourage business to comply with new regulations.
    The total percentage of the taxes imposed on cannabis will equal the share of cannabis production that goes to the black market.

    • You are right, and more’s the pity; but we never thought that “legalization” would turn out to a perpetual Make Work opportunity for the government…did we?

    • The government couldn’t lower the taxes growers pay. Growers spent decades not paying in the first place.

      • Well, it’s not wise to begin taxing at close to 25%.
        It’s also not wise to begin with a regulation scheme that’s so cumbersome. I get a tummy ache by the third paragraph.
        Let my neighbors clean up their land and roads, check that mine are mostly above standards, but show me the one thing I didn’t know about, and then let me do what.ive always done with my own business otherwise.
        Then lots of people start to come into compliance with what we are worried about- the environment- and we can build rules for the rest of it as time goes by.
        The way this is rolling out, it’s throwing non-swimmers into rough seas and waiting for them to drown.

  • ” $2.75 per dry-weight ounce of cannabis leaves [$44 per pound]”.
    Good luck to all of you. This is the final stab at small businesses. 44$ a pound of leaf is more than its black market sales price.

    • More than twice what I heard.

    • Clean, lab tested trim will likely go for around $400 a lb. pretty soon, and yes, people will buy it because that will be the price and once extracted, it’s worth 1-5k. Trim has been sold for way too low of a price, if you look at the retail value of it. The added tax and lab fees, aren’t going to be absorbed by the cultivator, as they will be getting more for it, not less in the future. Instead of $15-50, if it can pass the lab, the cultivator could be getting $150-200 each. The manufacturers and middle men have been ripping cultivators off for years! Black market will still be worth $15-50.

      • Did you factor in the 1000 acre grows coming to the valley, FLOODED market trumps everything

        • No. Nobody is factoring that in. Those scenarios do not exist in la la land.

          • Most are factoring that in, at least locally. Why do you think the compliance numbers are so low? People can’t spend that money to be compliant when the likelihood the market will go away is so high.

        • Cannabis grown in the central valley won’t pass the lab test. I do agree big grows are coming, and I wouldn’t plan to pass a cultivation business down to my kids, but for the next 5 years, there won’t be any thousand acre grows. I’d be more concerned over the 1,000 half acre grows going up south of here.

  • Sounds about right, taxes on tobacco are about 80 percent of its total value, so weed will be around 175 a pound ,not sure if it will settle at that high of price

    • Yes, but the consumer, not the cultivator, pay the tobacco taxes. And they are sin txes because tobacco is bad for you. Marijuana is more or less good for you.

  • That all seems really easy to understand and comply with. Thank you California.

  • So how many think the black market is going to keep on keeping on? 🤣

  • How about paying the taxes on your income and call it a day!

    • Because income taxes suck. Period.

      I hated them at every job I’ve worked.

      I don’t mooch off of goverment programs, and I don’t give to them.

      I have to pay taxes on everything else. And your welcome for my contributions.

      Social security can be taken away at anytime, and we’re just fucking the world up with ridiculous wars – thanks income taxes!

      *with that all said, believe it or not I look forward to (good) Regulation of pot grows.

    • Lost. Your idea is the best. This is just another small business and should be taxed that way.

  • During the transition period dispensaries that have not received their state license yet are not allowed to buy from licensed distributors, they can still purchase from unlicensed vendors as they always have. Once they get their license they can only buy from licensed distributors, not from growers even if the grower is licensed. The state has mandated a middleman, the distributor, be the only ones that can legally purchase from a grower.

    • Sign me up for middleman gig

      Oh that’s helpful.

      And fucking corrupt as hell.

      Wow.

    • Now that medical marijuana recommendations can only be given by your primary physician and doctors have new imposed recommendation percentage restrictions.It appears to get tax exempt medical marijuana will require a few more steps .This is the loophole the Ca gov revenue dept is trying desperately to close .The Public is to uninformed to even understand Ca medical patients are actually losing access to be able to buy a tax free prescription.Its facinating the mmj market is being restricted to shut out mom and pop providers and demolish an entire medical market.This is a strategy planned and implemented by lawyers and investors.

      https://www.boe.ca.gov/news/2016/92-16-G.htm
      “Sacramento – The November 8, 2016 passage of Proposition 64 (The Control, Regulate and Tax Adult Use of Marijuana Act) exempts certain sales of medical marijuana from sales and use tax.

      Sales of medical cannabis to those who have a medical marijuana identification card (MMIC) issued on a county-by-county basis by the California Department of Public Health (CDPH) and a valid government-issued identification card are now exempt from sales and use tax. Consumers can obtain the CDPH-issued cards at their county health department, at a cost that varies by county. A paper recommendation from a physician is not sufficient to qualify for this sales tax exemption.

      This county-issued MMIC will have the State of California seal and indicate whether the card holder is a “patient” or “caregiver.” The card will also contain the patient’s or primary caregiver’s photo, a nine-digit ID number, a CDPH website to verify the ID number, an expiration date, and the county that issued the card, as shown below. Cards are valid for the duration of the physician recommendation or up to one year, at which time the card must be renewed. Retailers should retain the purchaser’s nine-digit ID number and expiration date, along with the related sales invoice or other record of sale, to support the exempt sale.”

      • groba dude osnt trustafarian

        “Medical Pot” – THAT’S the biggest joke there is! Pot. Is. Not. Medicine.

        Cannabis – You smoke it, and it gets you high. The end. If you like spending your life being short circuited all the time, go for it!

        Life is better clean and sober. There are thousands of ways to make money in this country, without breaking the law.

        Dope is for dopes. Why do you need to be high all the time?

        AND: Dear Humboldt – that stuff you grow, when you burn it, it stinks!

        Good luck everyone, you are going to need it!

        • My mom beat cancer with cannabis, at least for now… The Chemo almost killed her! Try reading… it’s not going to hurt you…

      • ummm question! then what is that tax that the dispensaries are charging NOW for medical marijuana? You mean they aren’t suppose to be charging tax on medical marijuana all this time?!

    • That middleman has always been a pain in the ass.

      • You enjoy a steady stream of randoms out on your ranch? Texas, Atlanta, Vegas, NYC, etc..
        Who gets the gate code?
        Brokers didn’t kill the market, 50 100ft hoop house 300 full term growers did.

        And the Socal voters… apparently not enough people read 64, just wanted “legalization” however drowned in taxation and legislation

  • ADHD and Aspergers

    Honestly it is mind boggling. The growers are taxed on sqfootage , raw product, AND income (if there is any!!)

    Not funny actually and far too much paperwork.

    Who thinks this stuff up? Where were all the self-appointed Cannabis Representatives when they did? This is illogical.

    They appear to have zero understanding of the way the industry and product present itself and flows.

    How do we define leaf? There’s so many grades of quality in this product and then typically the price is reflective of those nuances.

    A flat tax per pound is ridiculous! The tax should be a percentage not a flat rate because, come on !! Sometimes a farmer had weaffy herb that if he sits on it all season may ultimately fly as Shake! Maybe ppl will say ..”well my flowers have leaves so I’m calling it leaf!!”

    And where do the smalls fall in??

    So many questions ..

    • Lawyers think this stuff up because they will be able to siphon off ANOTHER percentage above all the taxes to “help” you figure out the rules and navigate the system. This should be renamed as the FULL EMPLOYMENT FOR ATTORNIES ACT.

  • haha , time for greedy growers to finally pay taxes.

    • Tea (HC) overboard

      Or not…. of 2000+ applications filed only about 100 approved in humblt . 8000+ gardens.

      Looks like a tax rebellion to me.

    • Haha. Time for the black market to come back in full force.

      • Enough with the black market shit. The government always finds a way to change the vernacular. The underground world ain’t goin nowhere, not with the systems in place. The gamble is still really, but now we have to deal with all these kiss growers talking shit on the underground market that many of them needed and used to come up in the first place. Dope yuppies is a right!! They’re everywhere. Can’t even waitnfiteen minutes for food in a small country town go back to the city!!!

    • @ workingman…No, the greedy ones are getting permitted and will find write offs and will pay almost nothing in taxes. Same as corporations, say in the tech space, with offices in San Fran… NO ONE PAYS TAXES, except cops, line workers, corporate treadmill folks, and firemen. SAD.

      • It’s hard for a business with no foreign subsidiaries to pay no taxes. But I do suspect that growers, with their long history of not paying anything, will continue to practice the same dishonest tactics legal or not. It will be a boom for lawyers for a couple of decades defending them. IRS has a much longer arm than the Sheriff’s office.

    • Every grower Ive ever know pays taxes. And they are afraid to take any deductions.

  • Start making moonshine. A lot less hassle. But “Still” it’s risky. Pun intended

  • Those that laugh at the “greedy growers”, will see that (greedy growers) are the ones who own and keep the legitimate businesses in this county afloat. As Humboldt falls into a recession again. We won’t be laughing. More meth and more homeless.

  • fuckwalterwhite.com

    City and County should be giving new non-weed businesses a huge hand in opening up some of these many empty storefronts in downtowns and malls,which would create more employers and jobs.
    Instead of chasing this tax and artisan dragon. State officials offering permits are still basically federal criminals.

    How many gov’t employees does it take to screw-in a grow lighbulb?

    • Yes because retail jobs pay a living wage around here right ? No one can afford to live here making 600 a week taking home 375 to 400 a week after taxes.

  • So, what’s the plan on shutting down the remaining 13,000 grows that HSO allowed to proliferate? Seriously, what a fucking joke this all is.

  • Another reason I voted NO. Another change,another,another,etc: the government can do what the hell they want , when they want.MORE MORE MORE,it will never end!!!!

  • DELUSIONAL LIBERAL

    BIG Brother wants to come aboard the Cannabis Cruiser But IT’S Ass is going to sink the ship!

  • Trillium Hummingbird

    Grow your own! Tax free.

    Mom and pop? Smoke another one and bitch about the old days. If you are broke, don’t get caught selling that shit… Maybe find a job…

    Everyone else: It’s a new dawn – adapt or go back where you came from…

    PAY YOUR TAXES – IT’S THE AMERICAN WAY!!

    • History: Boston Tea Party?

      “Pay Taxes…American way”..pffff.

      The American dream is and has been to work hard and come up. No one likes taxes, especially if they’re not collected and reallocated to where they belong.

      I did not like your soundbite.

  • Sounds nobody wants to conform.

  • Once again, What is the plan by the BOS to eliminate the 13,000 illegal grows not going for permits while the state and county tax and ordinance the crap out of people trying to be legal .
    No one ever answers this question. Not law enforcement ( lazy bastards want you to rat people out for them), not the BOS, not the consultants, not the policy makers, no one.

  • Fucking ridiculous! Dispensaries get $4600/pound and pass their tax responsibility on to the end user.

    • Steve D’Angelo of Harborside. When prices to growers started going south 5 years ago he paid less and less for product. Never lowered the price for his treasured patients at his dispensaries. Boasted and convinced others about how much he was doing to “help the sick people”. Called all the NoCal growers “greedy” for not accepting his Prop 19. Pushed this current “legalization” and now has many huge greenhouses in Salinas. Remember- everybody up here is “greedy” and he is a “humanitarian”. Yup. That’s even what a bunch of misguided urban hippies believe. That’s how far into idiocracy we already are. Can’t fix stupid.

      • But that is the same rationale for every pot dealer and user. “It’s not a drug. It’s medicine.” Meanwhile the grower deals with people who are likely to steal his pot with violence to make lots of money and the user ends up “needing ” this medicine forever to find that elusive cure, which ends up meaning sitting in the house smoking most of every day.

        Give it a rest. Pot is not an industry of honesty at any level. It’s born of a desire for delusion at its very core.

        • As Augustine wrote, “the world is a liar, and deceiveth.”

          Forget what you think is the real root of the drug war; at the end of the day, this is it: “Guest” speaks for many in cultural Christendom when he finds “delusion” at “the very core” of weed culture and consumption.

          When you drill down, though some of these folks don’t even consider themselves “religious,” you find that they believe that using weed is an illegitimate attempt to escape the suffering that God ordained for all humans when Adam and Eve disobeyed his order to leave alone that one tree.

          For them, salvation is after death, “heaven is under the earth,” and any suggestion otherwise is from the Dibble.

          Because plants are of the earth and not the sky, they offer only the “delusion” of communion with the divine, while the reality must always be deferred.

          It’s a deep-seated cultural notion for which we have no ready replacement.

  • Greedy bastards had a chance to really hurt the back market and help the environment. What a shame!

  • How very Republican of you. Read My Lips. No New Taxes.

  • Well thanks fucking loads you asshole voters who had to have more government control in an already to governed world. Next time read the fine print. And to the narrow minds with wide mouths if you had mailed at people being able to make a living then you will really be able to get your hate on big corporation is going to rape the land and rake it in putting most of us mom n pops ass out. Who are the fucking fucks who put the fees, permits,tax schedules that are beyond overboard to comply with and who’s pockets are getting lined? [edit]

    • There were probably three motivations for voting for legalization. 0ne, those who liked the idea of the main love of their lives becoming safer to possess and looked no further. Two, those who simply got tired of the expensive and useless effort of trying to rein in abuses by users and growers by enforcing laws, which proved no deterrent. And three, those who saw that pot could be turned from a massive drain of government funds to a bonanza.

      Each turned out to be right in their assessments. The only group made unhappy are those who managed to make lots of money through selling a product at prices kept artifically high by government laws while not having to deal with government red tape. Of course that last group will be very, very angry. The Golden Goose is, if not exactly dead, on life support.

  • All this proves is that the goverment doesnt truely care about cannibus only about how much money they can make from it. If they were truely about protecting freedoms and liberties they would not be looking at cannibus as a winning lotto ticket to balance all of their mismanaged tax money with inflated spending . The unions supports this as it is a way for them to keep the dues coming in by state counties and cities not having to tighten belts and lay off union workers. The welfare workers teachers road workers epa law enforcement all of them look at this as a way to increase their budgets and be able to bargain for higher pay without having to hear the song and dance about there not being enough to go around.
    However, be warned as i see lawsuites coming at a fast pace to these local goverments who have granted permits and collected fees , large fees, as there is case law already supporting the sueing of issuseing goverments for unfair practices if they are not enforcing compliance under unfair buisness practices. The ones with the permits can enmass sue state city and county for enourmus sums for allowing unpermitted farms to stay operational.since these goverment offices do not have the resources to enforce equally compliance they will call in the feds. The feds will gladly move in, and start raiding and auctioning homes and properties . This will drive up the market value of cannibus and lower property values as auctions happen. However there is pause in this as there will also be problems with the ability to sell off said properties as they will have all these problems like stream crossings etc that will have to be either approved prior to auctions or corrected, or some sort of underwritting stating that they must be corrected within x number days post sale. Unless there really is no real problems and they are just looking at ways to impose greater fines, and stronger cases. But if they seize property with these problems, then they are also just as guilty as any single owner for having these problems on properties they own and should by equal enforcement of law be subject to the same fines and penalties as any private persons.

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