Every tax season you should get down on your knees and thank the god of cannabis for making state coffers so needy for money. Don’t fool yourself, tax revenues are what cannabis legalization is all about. That is precisely why you should pay very close attention to all the many rules regarding taxation for pot growers, weed distributors, and cannabis dispensaries.
If you are in California you should keep a close eye on the California Department of Tax and Fee Administration (CDTFA). That website is a vital tool for you to keep in compliance with California state tax rules and regulations. Here are some of the things you will find on that site:
- You can register for a CDTFA seller’s permit on this site — that is an extremely important thing to have if you are in the business of selling retail marijuana products.
- If you are retailing marijuana products you must collect retail sales tax on all products whether they are cannabis-related or not. That means all flower, oils, resins, vape tools, rolling papers, pipes, and anything else you sell. A retail sale is taxable whether it contains THC, CBD, or anything else.
- Remember to pay the Cannabis Excise Tax directly to your distributor. The cannabis excise tax is not the same thing as your sales and use tax and should not be included in your sales and use tax return. You only will be collecting the excise tax as part of what you charge your customers who purchase cannabis or cannabis related products like edibles and oils.
- The cannabis excise tax is a 15% tax added to retail purchases of all cannabis and cannabis products including medicinal cannabis and any other product that contains cannabis, whether THC or, in most cases, CBD. For more information go to the CDTFA website.
- Unless your customer has a valid medical marijuana identification card indicating that they are either a primary caregiver or a patient, you must collect sales tax on anything they buy from you.
- If your customer buys cannabis accessories such as pipes rolling papers, vape machines, shirts, hats, books, magazines and anything else that does not contain cannabis, you do not have to charge excise tax. However, you must charge retail sales tax according to the requirements of your local municipality. If you have questions check with your local city hall.
- Cannabis excise tax must be charged on every single sale of a cannabis product. It must be remitted to your distributor.
- Retail sales tax must be paid to your taxing authority but there is nothing that requires you to actually charge your customer separately. You can simply add it into your cost of the item, but it must be paid to your taxing authorities.
One very important thing to check out is whether you might be affected by the new changes that are scheduled to happen on April 1, 2019. These are for California, but it is likely that other states are also still in the process of changing their tax laws and other reporting and operating requirements.
Cannabis laws and taxes vary from state to state and also counties and municipalities within states. Failure to file taxes and any related forms on time can result in the abrupt closing of your business. The best advice I can give you is to hire a good consultant to make sure you are prepared for everything. There are many confusing laws depending on whether you are growing marijuana, distributing weed products, or just selling medical or recreational pot in a dispensary. Many dispensaries are finding that delivery is a lucrative service to offer. It is a new feature in many communities, but even that entails compliance with various new rules.
It will pay to remember that taxing authorities don’t mess around when it comes to collecting taxes and punishing those who don’t follow the rules. The marijuana industry has operated in the shaddows, so many growers and dealers have fallen into bad habits regarding record-keeping and detailed compliance with the new and ever-changing weed laws. Ignorance or forgetfullness are no excuses when the authorities come calling. Make sure you are well-informed.
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