Tax Guide for Medical Cannabis Businesses: Dispensaries

Tax Guide for Medical Cannabis Businesses

New Information – On November 8, 2016, California voters approved Proposition 64, Control, Regulate and Tax Adult Use of Marijuana Act, which provides:

Effective November 9, 2016, certain sales of medical marijuana are exempt from sales and use tax. (see the Dispensaries tab, under the heading, Proposition 64 Exempts Certain Medical Marijuana Sales)

Effective January 1, 2018, a 15 percent excise tax is imposed upon purchasers of all marijuana and marijuana products. Additionally, a tax on cultivators of marijuana is imposed as follows:

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

We will update this guide with additional information on the excise tax and cultivation tax as it becomes available – please check back.

Helping your business succeed is important to the Board of Equalization (BOE). To help you better understand the tax obligations specific to your medical cannabis business, we have created this guide detailing the tax issues and important information relevant to your industry.

Please note: This guide is intended to provide general information regarding issues relating to the sales and use tax laws and other programs administered by BOE which may affect medical cannabis businesses. It is not intended to provide advice or guidance related to other state and local statutes and regulations relating to the cannabis industry. Additionally, for the Federal Government’s guidance regarding marijuana enforcement, refer to the U.S. Department of Justice website.

Medical Cannabis

The Dispensaries section covers topics related to the general application of tax to purchases and sales by dispensaries. It also has information on exemptions that dispensaries may qualify for and the exemption certificates required.

Please note that the general information provided is not intended to replace any law or regulation.

Dispensaries

Please note: This guide is intended to provide general information regarding issues relating to the sales and use tax laws and other programs administered by BOE which may affect the medical cannabis industry. It is not intended to provide advice or guidance in relation to other state and local statutes and regulations relating to the cannabis industry. Additionally, for the Federal Government’s guidance regarding marijuana enforcement, see the U.S. Department of Justice website.

Seller’s Permit

All retail establishments that sell medical cannabis and cannabis-related items in California must register with the BOE for a seller’s permit, including itinerant or mobile dispensaries. You are not required to disclose what you sell.

Proposition 64 Exempts Certain Medical Marijuana Sales

Effective November 9, 2016, certain sales of medical marijuana are exempt from sales and use tax.

Sales

Your sales of medical cannabis and cannabis-related items are generally subject to tax, unless your customer provides you with a valid Medical Marijuana Identification Card indicating they are a qualified patient or the primary caregiver for a qualified patient, along with a valid government-issued identification card. Please refer to the heading, Proposition 64 Exempts Certain Medical Marijuana Sales, above for more information.

Consignment Sales

You are responsible for obtaining a seller’s permit and reporting and paying the sales tax on the retail selling price of consignment sales.

Purchases

When you purchase an item that will be resold, you can purchase it without paying tax by timely providing the seller a valid resale certificate. Sales tax will apply when you sell the item at retail. However, when you purchase an item for resale without paying sales tax but, instead of selling it, you consume or use the item, then you owe use tax based on the purchase price.

Record Keeping

You are required by law to keep business records so that we may verify the accuracy of your sales and use tax return and determine how much tax is due, when a return has not been filed.

 

 

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