Cannabis Retailers: Excise Tax Does Not Apply to Free Medicinal Cannabis

Cannabis Retailers: Excise Tax Does Not Apply to
Free Medicinal Cannabis
Use Tax is Due on Cost of Medicinal
Cannabis Given Away for Free

As a cannabis retailer, you are prohibited from giving away any amount of cannabis or cannabis products unless authorized to do so by the Bureau of Cannabis Control (BCC), the agency that administers the cannabis licensing activities for retailers and distributors. If you are authorized to give cannabis or cannabis products away free of charge, the cannabis excise tax does not apply; but you do owe use tax on your purchase price of the cannabis or cannabis products. The following explains:

Cannabis Excise Tax
The BCC provides that free cannabis or cannabis products can be provided to medicinal cannabis patients or primary caregivers in possession of valid Medical Marijuana Identification Cards issued by the California Department of Public Health. The cannabis excise tax does not apply to medicinal cannabis provided for free to qualified patients. If you already paid the excise tax to a cannabis distributor, you may request a return of the tax from the distributor who supplied you with the cannabis or cannabis product. For additional information on what can and cannot be given away for free, please contact the BCC.

Sales and Use Tax
You owe use tax based on your purchase price of the cannabis or cannabis products you provide to medicinal cannabis patients or primary caregivers free of charge. Or, if you are also a licensed manufacturer, you owe tax on the cost of the taxable items used to manufacture the cannabis products. To pay use tax, report your purchase price of the cannabis as “Purchases Subject to Use Tax”on your sales and use tax return. Those purchases become part of the total amount that is subject to tax.

This email is intended to give you an overview of the tax application of free medicinal cannabis 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.

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