Tax Guide for Medical Cannabis Businesses, Part 2 (Consignment Sales)

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.

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.

When you have possession or control of the item you are selling, and can transfer ownership or use of the item to the buyer without further action on the part of the owner, you are considered the retailer of the item.

For example, your dispensary accepts pipes and accessories to sell on consignment. You agree to sell the products, but will not pay for the product unless it sells. Your agreement authorizes you to sell the products and transfer ownership to the buyer. You are considered the retailer of the accessories you sell in this way and must pay sales tax based on your retail selling price.

Instead of making direct sales, individuals and businesses often place goods with others who make sales for them. These types of transactions are commonly called consignment sales. In most cases, the owner of the item (the consignor), and the seller (the consignee), need to register with us to obtain a seller’s permit, and report and pay sales on their returns. However, if you make no more than two qualifying sales or consignments in any twelve—month period, your sales are generally considered “occasional sales”, and you do not have to register for a seller’s permit or report those two sales or consignments.

I sell items placed with me on consignment. When is my consignment sale considered a retail sale?

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

Have possession or control of the item you are selling, and

Can transfer ownership or use of the item to the buyer without further action on the part of the owner.

For example, you may own a jewelry store where you sell jewelry on consignment. Typically, the owner of the jewelry will bring it to you and sign an agreement that authorizes you to sell the item and transfer ownership to the buyer. You are considered the retailer of jewelry you sell in this way and must pay sales tax based on your retail selling price.

If you make sales on behalf of others, and those sales do not meet the two conditions described above, please read see Broker Sales.

Note: This publication summarizes the law and applicable regulations in effect when the publication was written, as noted above. 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.

About
“If you can't figure it out, figure out a "work-around!" The NestEggg Group was founded with a firm belief that working exclusively with professional firms to help them see past their history into the potential of their futures. Your potential is limited only by your creativity. Jeff's business purpose— “why”—centers on changing results through viewing things in new ways. He expounds: “Changing our results requires changing our actions. Because what we do proves what we believe, only when we change our beliefs can we progress. New insights are what cause us to shift our beliefs.” So what results do you want to attain? Call Jeffrey (1-888-987-NEST) when it’s time for progress. About Robert "Jeffrey" Wolter, President The NestEggg Group, Inc & EgggsAct Tax, Inc. & Managing Member NestEggg Investment Advisors Jeffrey is a common sense and productivity strategist. He facilitates and teaches about growth, positioning, and pricing strategies; leadership; operations; business communications and philanthropy. What he does best—differently from others—is energize people while he shows them how to solve business effectiveness. He clarifies the intricate, huts new light. He encourages hope. He sets you up to make development possible. Jeffrey is recognized for his original ideas and success with practical implementation, even as he challenges the "norm". Jeffery is a skilled facilitator. His deep knowledge of his firm(s) operations and ability to understand the intricacies of All of his clients, gives way to sharp observation skills allow his grasp a firm’s nuances quickly. He then guides firm owners and their teams on their unique paths toward improved profitability, smoother operations, stronger cultures and how and when to give back. Since 1998, he's helped more than 5,024 QuickBooks users and business owners achieve results such as: expanding revenues, attracting and inspiring talent, aligning operations with long-term objectives, discovering and leveraging their differentiation, substantially increasing sales and proposal results, strengthening relationships with their clients, and finding more joy in their work. His 25+ year career background includes roles as entrepreneur, finance director, board of director for several nonprofit, creative business development, insurances agency owner, Wealth Management Firm owner, editor, Tax Specialist, Accounting Director, Mediator and more. Before creating his firm in 2007, Jeffrey was an accountant for several well know local firms and individuals. After building a successful accounting practice, he became intrigued and inspired by the uniqueness of how Insurance, Investment's/Wealth Management, Taxes and Accounting/Bookkeeping all tend to work together, he branched out and created his list of Affiliate Companies in 2012 & 2013 In 2013, joined the Intuit Accountants Council and has assisted in the continued enhancement of the popular QuickBooks (Desktop and Online versions) and did so until late 2015. In 2014 with the legalization of Marijuana, Jeff and his team have committed themselves to knowing as much about the industry and being there to offer Cannabis Compliant, Accounting, Tax & Insurance to business owners that have or need help in keeping in with the Federal government's "280E"
Contact Us

Send us an email and we'll get back to you, asap.

Not readable? Change text.