TAX HELP FOR THE CANNABIS INDUSTRY An Overview of California Sales and Use Tax and Cannabis Tax Laws
| TAX HELP FOR THE CANNABIS INDUSTRY An Overview of California Sales and Use Tax and Cannabis Tax Laws |
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California Department of
Tax and Fee Administration
(CDTFA) welcomes you and
your cannabis business.
Whether you are a cannabis cultivator, Get Registered!
manufacturer, distributor, or retailer, it is If you sell cannabis or cannabis products, you must:
essential to understand how California Register with us for a seller’s permit,
Department of Tax and Fee Administration File your return, and
(CDTFA) administers the California sales Report and pay the sales or use tax.
and use tax and the cannabis tax. This Cannabis businesses making sales are required to
publication provides a general overview. obtain and maintain a seller’s permit as a prerequisite
for applying for a license with Department of Cannabis
Please visit our Tax Guide for Cannabis Control.
Businesses for in-depth information to You can register for a permit online at www.cdtfa.ca.gov.
help you understand and comply with Click Register to get started. There is no cost to register
your tax obligations: for a seller’s permit.
Distributors of cannabis or cannabis products must
www.cdtfa.ca.gov/industry/cannabis.htm. also register for a cannabis tax permit to report and pay
the two cannabis taxes (Cultivation Tax and Cannabis
Excise Tax) to us. The cannabis tax permit is separate
from your seller’s permit.
Filing Returns and Making Payments
After you register, we will notify you how often you must
file your return(s) and make your payment(s).
You must file your tax return(s) and pay any taxes due
on time. Otherwise, you will owe penalties and interest.
You must file your sales and use tax return by the
deadline even if you do not make taxable sales (for
example, all your sales are for resale). Additionally, if you
are a cannabis distributor, you must file your cannabis
tax return even if you have zero transactions to report.
Payments can be made online, by mail, or in person at
your local office. For information or questions regarding
acceptable in-person payment methods, contact your
local office.
For more information on how to register, file, and pay,
visit our website at www.cdtfa.ca.gov.
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For information on calculating the average market Keeping Records The use tax and the cannabis excise tax does
not apply when a cannabis retailer donates free
price, see our Tax Guide for Cannabis Businesses You must keep accurate and complete records. medicinal cannabis to a medicinal cannabis
located at www.cdtfa.ca.gov/industry/cannabis.htm. We understand the challenges facing the cannabis patient, or when another licensee, such as
Distributors must collect the excise tax from the industry, but California law requires that you keep a distributor or manufacturer, donates free
retailers they supply with cannabis or cannabis sales and purchase records, receipts, resale medicinal cannabis to a retailer for subsequent
products based on the average market price of the certificates, and normal books of account. donation to a medicinal cannabis patient.
cannabis or cannabis products. Read our Tax Guide for Cannabis Businesses
www.cdtfa.ca.gov/industry/cannabis.htm Trade Samples
Certain cannabis licensees may provide cannabis
Cannabis Distributors
trade samples to other licensees for targeted
If you are a cannabis distributor, you are required to: advertising of cannabis or cannabis products.
Register online with us for a cannabis tax permit Cultivation tax does not apply to harvested cannabis
and a seller’s permit if you make sales. or cannabis used to manufacture cannabis products
Collect the excise tax from retailers you supply that is designated as a trade samples and given
with cannabis or cannabis products. to other licensees for no cost or consideration.
Additionally, cannabis excise tax does not apply
Collect the cultivation tax from cultivators or to cannabis or cannabis products designated as
manufacturers who sell or transfer cannabis or trade samples and not sold to other licensees or
cannabis products to you. consumers.
Cultivation Tax File both your cannabis tax and sales and use tax
Equipment Exemptions:
A tax on harvested cannabis entering the returns electronically and pay any amount due to us. Tax Exemptions Are Available If you are a cannabis cultivator or manufacturer, you
commercial market is imposed upon cultivators.
If you are a cannabis cultivator, you must pay Retail Sales to Qualified Patients Exemption: may qualify for a partial sales or use tax exemption
the cultivation tax to either a distributor or a Sales and Use Tax Medicinal cannabis or cannabis products sold at on equipment purchased to produce or manufacture
manufacturer based on the weight and category of If you sell cannabis or cannabis products to retail to qualified patients or their primary caregivers your products.
the cannabis. There are three categories: consumers, those sales are generally subject to are exempt from the sales and use tax when the
For information on these exemptions and
sales or use tax. This includes sales of cannabis patients or primary caregiver show the following to
others available for the cannabis industry, see
Cannabis flowers flowers, hash, bud, vape pens, edibles (food the retailer at the time of purchase:
Cannabis leaves products containing cannabis), oils, and plants. our online Tax Guide for Cannabis Businesses at
A valid Medical Marijuana Identification Card www.cdtfa.ca.gov/industry/cannabis.htm.
Fresh cannabis plant The sales or use tax must be reported on your sales issued by the California Department of Public
To qualify for the “fresh” category, the cannabis and use tax return and paid to CDTFA. The cannabis Health (CDPH), and
For More Information:
plant must be weighed within two hours of excise tax is included in gross receipts for purposes A valid government-issued identification card. Visit our Tax Guide for Cannabis Businesses
harvesting and without any artificial drying or other of the sales tax.
Donated Medicinal Cannabis Exemptions: on our website for in-depth information to
form of drying or curing. If sales tax is included in the selling price of the help you comply with your tax obligations.
Cannabis retailers may donate free medicinal
CDTFA is required to annually adjust the items, you must post a sign in a visible location at www.cdtfa.ca.gov/industry/cannabis.htm.
cannabis or medicinal cannabis products (medicinal
cultivation tax rates for inflation. You can your place of business stating “sales tax included,”
cannabis) to medicinal cannabis patients, or
find current tax rates on our website at or include this statement on your invoice or receipt. For the Federal Government’s guidance regarding
cannabis licensees may donate free medicinal marijuana enforcement, see the U.S. Department of
www.cdtfa.ca.gov/taxes-and-fees/tax-rates-stfd.htm. cannabis to cannabis retailers for subsequent Justice website at www.justice.gov.
Resale Certificates donation to medicinal cannabis patients.
Cannabis Excise Tax The sale of cannabis or cannabis products for resale A medicinal cannabis patient is a qualified
A 15 percent cannabis excise tax is imposed upon is not subject to sales tax. If you sell cannabis or patient who possesses a qualifying physician’s
retail purchasers of cannabis or cannabis products. cannabis products for resale to other licensees, such recommendation, or a qualified patient, or the
Cannabis retailers are responsible for collecting the as a distributor, make sure the purchaser gives you patient’s primary caregiver with a valid Medical
excise tax from their retail customers. The excise tax a timely and valid resale certificate. If you do not Marijuana Identification Card issued by the CDPH.
is calculated based on the average market price of receive a valid resale certificate, you may be liable
the cannabis or cannabis products sold at retail. for the sales tax. For the required elements of a The cultivation tax does not apply to medicinal
valid resale certificate, see publication 103, Sales for cannabis that a cultivator designates for donation
Resale, on our website at www.cdtfa.ca.gov. in the California Cannabis Track-and-Trace System.
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Need Assistance?
Free in-person sales and use tax educational
consultations are available for your business.
Contact your local office to schedule an
appointment. Find a listing of offices online at
www.cdtfa.ca.gov/office-locations.htm.
Do you need help filing your return or have a
general tax question?
Call our Customer Service Center at 1-800-400-7115
(CRS:711) Monday through Friday 8:00 a.m. to
5:00 p.m. (Pacific time), except state holidays.
Get It in Writing
Tax laws can be complex. We encourage you to
send your tax questions to us in writing. Provide the
specific facts and circumstances of your planned
sales or purchases and ask how tax applies to your
transaction.
Requests for written advice can be emailed or
mailed directly to a CDTFA office nearest you.
Find our contact information at
www.cdtfa.ca.gov/contact.htm.
Taxpayers’ Rights Advocate
Call 1-888-324-2798 for help with problems you
have not been able to resolve through normal
channels (for example, by speaking to a supervisor).
This publication summarizes the law and applicable regulations
in effect when it was written. However, changes in the law or in
regulations may have occurred since that time. If there is a conflict
between the text in this publication and the law, decisions will be
based on the law and not on this publication.
www.cdtfa.ca.gov
Publication 557 (1-22)
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