(a) Pursuant to Business and Professions Code section 494, the Bureau may petition for an interim order to suspend any license or impose licensing restrictions upon any licensee, if: (1) The licensee has engaged in acts or omissions constituting a violation of the Business and Professions Code or this division, or been convicted of a crime substantially related to the licensed activity, and (2) Permitting the licensee to continue to engage in the licensed activity would endanger the public health, safety, or welfare. (b) An interim order for suspension or restrictions may issue with notice, as follows: (1) The Bureau shall provide the licensee with at least 15 days’ notice of the hearing on the petition for an interim order. (2) The notice shall include documents submitted in support of the petition. (c) An interim order for suspension or restrictions may issue without notice to the licensee, as follows: (1) If it appears from the Bureau’s petition and supporting documents that serious injury would result to the public before the matter could be heard on notice. (2) The Bureau shall provide the licensee with a hearing on the petition within 20 days after issuance of the initial interim order. (3) Notice of the hearing shall be provided within two days after issuance of the initial interim order. (d) The Bureau shall file an accusation, pursuant to Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code, within 15 calendar days of the issuance of the interim order. Authority: Section 26013, Business and Professions Code; Reference: Sections 494, 26011.5, 26012 and 26031, Business and Professions Code.
BUREAU OF CANNABIS CONTROL;§ 5803. Contesting Citations
(a) A cited licensee or person may, within 30 calendar days of service of the citation, contest the citation by requesting a hearing in writing to the Bureau or such hearing is waived. The hearing shall be conducted in accordance with Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of the Government Code. (b) In addition to requesting a hearing provided for in subsection (a) of this section, the cited licensee or person may, within 15 calendar days after service of the citation, submit a written request for an informal conference with the Bureau regarding the acts or omissions charged in the citation. (c) The Bureau shall, within 15 calendar days from receipt of the written request, hold an informal conference with the licensee or person cited, and/or his or her legal counsel or authorized representative. (d) At the conclusion of the informal conference, the Bureau may affirm, modify, or dismiss the citation, including any fines levied or orders of abatement issued. A written decision stating the reasons for the decision shall be mailed to the cited licensee or person and his or her legal counsel, if any, within 15 calendar days from the date of the informal conference. This decision shall be deemed to be a final order with regard to the citation issued, including the levied fine and the order of abatement, if any. (e) If the citation is dismissed, any request for a hearing shall be deemed withdrawn. If the citation is affirmed or modified, the cited licensee or person may, in his or her discretion, withdraw the request for a hearing or proceed with the administrative hearing process. (f) If the citation, including any fine levied or order of abatement, is modified, the citation originally issued shall be considered withdrawn and new citation issued. If a hearing is requested for the subsequent citation, it shall be requested within 30 calendar days in accordance with subdivision (b)(4) of section 125.9 of the Business and Professions Code. Authority: Section 26013, Business and Professions Code. Reference: Sections 125.9, 26012 and 26016, Business and Professions Code.
BUREAU OF CANNABIS CONTROL;§ 5728. Post Testing Sample Retention
(a) The laboratory shall retain the reserve sample, consisting of any portion of a sample that was not used in the testing process. The reserve sample shall be kept, at minimum, for 45 business days after the analyses, after which time it may be destroyed and denatured to the point the material is rendered unrecognizable. (b) The laboratory shall securely store the reserve sample in a manner that prohibits sample degradation, contamination, and tampering. (c) The laboratory shall provide the reserve sample to the Bureau upon request. Authority: Section 26013, Business and Professions Code. Reference: Sections 26100, 26104 and 26110, Business and Professions Code .
Microbusinesses or Cannabis Businesses with Multiple Licenses: How to Calculate the Cannabis Excise Tax on Nonarm’s Length Transactions
Microbusinesses or Cannabis Businesses with Multiple Licenses: How to Calculate the Cannabis Excise Tax on Nonarm’s Length Transactions
Distributors or microbusinesses authorized to operate as distributors are required to calculate and collect the 15 percent cannabis excise tax from cannabis retailers on the sale or transfer of cannabis or cannabis products (cannabis) based on the average market price of the cannabis. In a nonarm’s length transaction, generally when a cannabis retailer is also the distributor, the average market price of the cannabis is equal to the gross receipts, and the 15 percent cannabis excise tax is applied to the gross receipts of the retail sale of the cannabis.
What is included in gross receipts?
Gross receipts include all charges related to the sale of cannabis, such as labor, services, and certain transportation charges. For example, as a retailer, when you deliver cannabis to your customers using your own vehicles and there is no explicit written agreement prior to the delivery that passes title to the purchaser before delivery, the charge for that delivery is included in the gross receipts subject to the cannabis excise tax. Additionally, if you add a separate amount to your customers’ invoices or receipts to cover a cannabis business tax required by your city, that amount is included in the gross receipts subject to the cannabis excise tax.
Example
You are a licensed microbusiness authorized to cultivate, distribute, and make retail sales of cannabis. You sell cannabis flowers to your retail customers for $35.00 per eighth of an ounce and charge $5.00 for delivery. You have an 8.5 percent sales tax rate and a 10 percent business tax. In this nonarm’s length transaction, the average market price is your gross receipts from the retail sale of the cannabis flowers.
Excise tax calculation:
Selling price of cannabis | $35.00 |
Cannabis business tax | $3.50 |
Delivery | $5.00 |
Subtotal ($35.00 + $3.50 + $5.00) | $43.50 |
Excise tax ($43.50 x 15%) | $6.53 |
Sales tax calculation:
Subtotal ($43.50 + $6.53) | $50.03 |
Sales tax ($50.03 x 8.5%) | $4.25 |
Total due ($50.03 + $4.25) | $54.28 |
The distribution part of your business is responsible for reporting and paying the cannabis excise tax of $6.53 ($43.50 × 15%) to the CDTFA on your cannabis tax return along with the cultivation tax that is due on the cannabis flowers that entered the commercial market. The cannabis retail part of your business is responsible for reporting and paying the sales tax of $4.25 ($50.03 x 8.5%) to the CDTFA on your sales and use tax return.
This email is intended to give you an overview of how the cannabis excise tax is calculated in a nonarm’s length transaction and does not address all requirements for the cannabis industry. We encourage you to read our online Tax Guide for Cannabis Businesses, or contact us at www.cdtfa.ca.gov/contact.htm.
Cannabis Distributors: Information on Collecting and Paying the Cultivation Tax
Cannabis Distributors: Information on Collecting and Paying the Cultivation Tax
As a licensed cannabis distributor (excluding transport-only distributors), you are required to collect the cultivation tax from cultivators, manufacturers, or other distributors based on the weight and category of the cannabis. The distributor who conducts the final quality assurance review after the cannabis or cannabis product passes the required testing is the distributor responsible for reporting and paying the cultivation tax to the California Department of Tax and Fee Administration (CDTFA). The cultivation tax must be reported during the reporting period in which the cannabis or cannabis product passes the required testing and quality assurance review, which is when the cannabis or cannabis product enters the commercial market.
In instances where there are multiple distributors and/or manufacturers involved, the associated cultivation tax collected will follow the cannabis or cannabis product and must be passed to the next licensee in the transaction until the cannabis or cannabis product reaches the distributor conducting the final quality assurance review. Each party to the transaction, from the original sale from the cultivator, to the final sale or transfer to the distributor, is relieved of its liability for the cultivation tax by receiving a proper receipt for payment of the cultivation tax from the next party in the transaction.
This email is intended to give you an overview of some of the requirements for cannabis distributors and does not address all requirements for the cannabis industry. We encourage you to read our online Tax Guide for Cannabis Businesses, or contact us at www.cdtfa.ca.gov/contact.htm.
Important Cannabis Excise Tax Reminders for Cannabis Retailers and Distributors
Important Cannabis Excise Tax Reminders for Cannabis Retailers and Distributors
Cannabis Excise Tax Requirements
Distributors are required to calculate and collect the cannabis excise tax from retailers on the sale or transfer of cannabis or cannabis products. Retailers are required to pay the cannabis excise tax to the distributor that supplied the cannabis or cannabis products to a retailer, and the retailers are required to collect the cannabis excise tax from their retail customers.
Distributors are required to provide retailers with an invoice or receipt that indicates, among other requirements, the amount of cannabis excise tax. The California Department of Tax and Fee Administration (CDTFA) may hold a retailer liable for the cannabis excise tax that is due to the CDFTA without a proper receipt, or proof that the retailer paid the cannabis excise tax to its distributor.
Retailers are required to collect the cannabis excise tax from their customers. The amount of the cannabis excise tax a retailer collects from a customer must be the same amount the distributor collected from the retailer. The retailer may include the cannabis excise tax paid to the distributor as part of the retail selling price of the cannabis or cannabis products.
Retailers are not required to separately list the cannabis excise tax on their receipts to the retail customer. However, the following statement is required to be included on the receipt whether the cannabis excise tax is listed separately or as part of the retail price.
“The cannabis excise taxes are included in the total amount of this invoice.”
Distributors’ Reporting Requirements
Distributors that supply cannabis or cannabis products to a retailer will be held liable for the cannabis excise tax due to the CDTFA. Distributors are required to report the cannabis excise tax on their electronic Cannabis Tax Return during the reporting period the distributors sold or transferred cannabis or cannabis products to a retailer. Distributors are required to electronically file their Cannabis Tax Return and pay the cannabis excise tax due to CDTFA by the last day of the month following the reporting period.
Arm’s Length Transactions
In an arm’s length transaction, generally where the distributor is unrelated to the retailer, the distributor calculates the 15 percent cannabis excise tax due based on the “average market price” of the cannabis or cannabis products sold to the retailer. The “average market price” is computed by applying the CDTFA’s predetermined mark‑up rate (currently set at 60 percent) to the retailer’s wholesale cost of the cannabis or cannabis products that were sold to the retailer. The predetermined mark‑up rate is only used to calculate the average market price in an arm’s length transaction, and is not intended to be used when determining the retail selling price of the cannabis or cannabis products.
Nonarm’s Length Transaction
In a nonarm’s length transaction, generally when the retailer is also the distributor, the 15 percent cannabis excise tax is applied to the gross receipts of the retail sale of the cannabis or cannabis products. The distributor in this type of transaction is responsible for reporting and paying the cannabis excise tax to the CDTFA based on the gross receipts of the retail sale. The retailer in this type of transaction is responsible for collecting the cannabis excise tax from the retail customer based on the gross receipts of the retail sale.
For More Information
This special notice is intended to give you an overview of some of the requirements for cannabis distributors and retailers and does not address all requirements for the cannabis industry. We encourage you to read our online Tax Guide for Cannabis Businesses at www.cdtfa.ca.gov/industry/cannabis.htm.
New Emergency Regulation for Cannabis Distributors and Retailers Requires California Cannabis Track-and-Trace
New Emergency Regulation for Cannabis Distributors and Retailers Requires California Cannabis Track-and-Trace
The California Department of Tax and Fee Administration (CDTFA) recently adopted emergency Regulation 3702, California Cannabis Track‑and‑Trace, which requires distributors and retailers to enter the wholesale cost and the retail selling price of cannabis or cannabis products into the California Cannabis Track-and-Trace (CCTT) system. The emergency Regulation 3702 is now in effect.
The Medicinal and Adult-Use Cannabis Regulations and Safety Act and regulations adopted by the Bureau of Cannabis Control (BCC) require all commercial cannabis activity be recorded in the CCTT system. Distributors and retailers that obtain an annual license with the BCC must begin recording commercial cannabis activity in the CCTT system. In addition to the existing requirements, each licensee must now enter the following information related to the cannabis excise tax.
Cannabis Distributors
A distributor is required to enter into the CCTT system the retailer’s wholesale cost of the cannabis or cannabis products that is sold or transferred to a retailer in an arm’s length transaction.
In an arm’s length transaction, the distributor is required to calculate the average market price of the cannabis or cannabis products, which is the retailer’s wholesale cost plus a mark-up established by the CDTFA. The wholesale cost used to calculate the average market price is the amount entered into the CCTT system.
Cannabis Retailers
A cannabis retailer is required to enter into the CCTT system:
- The wholesale cost of the cannabis or cannabis products. The wholesale cost is the amount paid by the retailer for the cannabis or cannabis products in an arm’s length transaction and is the amount used to calculate the average market price.
- The retail selling price of the cannabis or cannabis products when the product is sold at retail.
For More Information
This Special Notice is intended to give you an overview of some of the requirements for cannabis distributors and retailers and does not address all requirements for the Cannabis Industry. We encourage you to read our online Tax Guide for Cannabis Businesses at www.cdtfa.ca.gov/industry/cannabis.htm.
CalCannabis Cultivation Licensing (CalCannabis), a division of the California Department of Food and Agriculture administers the CCTT system. For more information visit CalCannabis at www.cdfa.ca.gov/is/mccp/ or call 1‑833‑CALGROW (1‑833‑225‑4769) with your specific questions regarding the CCTT system.
If you have additional questions regarding the excise or sales tax requirements, please call our Customer Service Center at 1‑800‑400‑7115 (TTY:711) Monday through Friday, 8:00 a.m. to 5:00 p.m. (Pacific time), except state holidays.
Four Palm Springs area pot shops are among the first in California to get annual licenses
California cannabis regulators are starting to dole out annual licenses to sell marijuana – and a handful of local pot shops are among the first crop of licensees.
Since the beginning of 2018, California cannabis regulators have been issuing temporary licenses valid for 120 days, plus additional extensions. But the Bureau of Cannabis Control, the agency that regulates certain cannabis businesses like retailers, distributors and event organizers, will stop issuing or extending those temporary licenses after December 31, 2018.
Four shops in Cathedral City and Palm Springs – Dank Depot, No Wait Meds, Atomic Budz and Leef Industries – are among the first ten companies to get annual retail licenses in California, according to the Bureau of Cannabis Control.
Leef Industries owner Kort Potter said he’s humbled to get one of the first annual licenses.
“I feel like a lot of eyes are gonna be on us,” he said.
The Bureau of Cannabis Control has issued more than 1,200 active temporary licenses as of Nov. 2. Industry observers greeted the first annual licenses as a welcome sign of progress, even while recognizing many cannabis companies have a long way to go before they can get compliant with still-evolving state regulations. As recently as October 2018, the Bureau of Cannabis Control has published changes to proposed rules, including expanding the definition of ownership of a cannabis business and updated packaging standards.
“A sigh of relief is probably a good way to explain it,” said Jordan Wellington, Chief Compliance Officer at Simplifya, a Denver-based software company that serves the cannabis industry. “There have been a lot of concerns that (the Bureau of Cannabis Control) was not going to get annual licenses issued.”
Wellington said the costs of applying for a cannabis license in California – as well as uncertainty as state regulations continue to shift – have disincentivized many cannabis businesses from seeking state licenses at all. But in the Coachella Valley, where many local cities have passed frameworks for weed shops to get local licenses, Wellington said pot businesses are already “better positioned” to transition to annual licenses than in parts of California where counties or municipalities haven’t created a local licensing system.
Jason Elsasser, President of Coachella Valley Cannabis Alliance Network, said the Coachella Valley still has a head start in California because some cities had already established medical cannabis regulations, and even pro-actively established adult-use cannabis regulations, prior to adult-use cannabis sales going live in 2018.
“The uniqueness would be that a lot of the cities here have established marijuana licensing before there was state licensing, so we’re ahead of the curve,” he said.
He said the early start has given municipalities like Cathedral City and Desert Hot Springs a chance to fine-tune their cannabis ordinances, exploring new business opportunities like cannabis lounges or adjusting local cannabis taxes.
“The fact that they’re moving forward and there isn’t significant delay is a really good thing,” he said.
For Potter, the owner of Leef Industries in Palm Springs, now the real work begins: Staying compliant with the law.
“I definitely don’t feel home free,” he said. “There’s a long road ahead.”
Thanks to Amy DiPierro covers business and real estate for The Desert Sun in Palm Springs. Reach her at 760-218-2359 or amy.dipierro@desertsun.com. for content share
Enforcement Action on Unlicensed Cannabis Retailers
SACRAMENTO – The Bureau of Cannabis Control (Bureau) and the Department of Consumer Affairs’ Division of Investigation-Cannabis Enforcement Unit (DOI-CEU), in coordination with the Los Angeles Police Department (LAPD), today announced enforcement action on an unlicensed cannabis retailer operating within the city of Los Angeles. [Read more…]
FOR NEW TEMPORARY LICENSES ISSUED PRIOR TO DECEMBER 31, 2018
Due to the large number of applications being submitted for temporary cannabis cultivation licenses, the California Department of Food and Agriculture (CDFA) hereby notifies prospective applicants that any application for a temporary license received after December 1, 2018, may NOT be processed in time for us to issue a temporary license before January 1, 2019. After December 31, 2018, the authority for CDFA to issue temporary licenses expires. To provide sufficient processing time, please submit your temporary application to CDFA’s CalCannabis Cultivation Licensing Division by December 1, 2018.
FOR EXTENSIONS OF TEMPORARY LICENSES PRIOR TO DECEMBER 31, 2018
To receive an extension of your existing temporary cannabis cultivation license, an application for an annual license must be submitted and the application fees paid prior to December 31, 2018. After that date, the authority for CDFA to extend a temporary license expires. If you do not have all the required documentation for an annual license application or are still in the permitting process with your county or city, please provide an explanation for the absence of any required item and submit the missing information as soon as it is obtained.
Submitting an annual application will allow CDFA to determine whether you qualify for an annual license or a provisional license in 2019.
Pursuant to Business and Professions Code section 26038, a person engaging in commercial cannabis cultivation without a license issued by CDFA shall be subject to civil penalties, and the cannabis may be ordered to be destroyed.
If you have questions about temporary, provisional, or annual commercial cannabis cultivation licenses, call us toll-free at 1-833-CALGROW (1-833-225-4769) or send us an email at: calcannabis@cdfa.ca.gov. Please visit our website at calcannabis.cdfa.ca.gov for step-by-step guides and videos on our cultivation licensing application process and information on the California Cannabis Track-and-Trace system.
If you are in in need of Cannabis Compliant Accounting & Tax, email The NestEggg Group.