CDTFA Cannabis Tax Discussion Paper 7 20 2018
CDTFA Cannabis Tax Discussion Paper 7 20 2018 Per your request for electronic copies of California Department of Tax and Fee Administration Business Taxes Committee material, here is a link to our website for the Discussion Paper regarding proposed rulemaking with respect to the Cannabis Taxes Regulations: https://www.cdtfa.ca.gov/taxes-and-fees/CannabisDPweb072018.pdf.
An interested parties meeting to discuss this issue will be held on August 2, 2018. Information regarding the meeting, including teleconferencing information, is included in the cover letter to the paper. If you have difficulty opening the link above, please do not hesitate to contact me to make alternative arrangements to receive a copy.
Issue Whether the California Department of Tax and Fee Administration (CDTFA) should amend and permanently adopt Cannabis Tax Regulation 3700, Cannabis Excise and Cultivation Taxes; permanently adopt Cannabis Tax Regulation 3701, Collection and Remittance of the Cannabis Excise Tax; and adopt Cannabis Tax Regulation 3702, California Cannabis Track-and-Trace, as an emergency regulation. Background In 2015, the Legislature enacted the Medical Marijuana Regulation and Safety Act (MMRSA), a package of legislation that established a comprehensive licensing and regulatory framework for the cultivation, manufacturing, transportation, distribution, and sale of medical marijuana.
The MMRSA consists of three bills: SB 643 (Ch. 719, McGuire), AB 243 (Ch. 688, Wood), and AB 266 (Ch. 689, Bonta). Among its provisions, the MMRSA established the Bureau of Medical Marijuana Regulation (Bureau) within the Department of Consumer Affairs to oversee and enforce the state’s medical marijuana regulations, in collaboration with the California Department of Public Health (CDPH) and the California Department of Food and Agriculture (CDFA). MMRSA and the Bureau of Medical Marijuana Regulation were subsequently changed to the Medical Cannabis Regulation and Safety Act (MCRSA) and the Bureau of Cannabis Control. On November 8, 2016, California voters approved Proposition 64 which established the Control, Regulate and Tax Adult Use of Marijuana Act (the Adult Use of Marijuana Act) (AUMA).
Among other things, AUMA added Division 10 (commencing with Section 26000) to the Business and Professions Code (BPC), Marijuana Regulation and Safety (MRS), which establishes nonmedical marijuana regulatory and licensing provisions, and added Part 14.5, Marijuana Tax, to Division 2 of the Revenue and Taxation Code (RTC) (commencing with RTC section 34010). In 2017, SB 94 repealed the MCRSA, included certain provisions from MCRSA into MRS, now known as the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA), and made further amendments to AUMA. With respect to taxes, SB 94 amended Part 14.5 to ease and streamline cannabis tax collection and remittance to the CDTFA.
As relevant here, SB 94:
(1) changes the law throughout to be the Cannabis Tax Law (CTL) instead of Marijuana Tax Law;
(2) revises the cannabis excise tax to be imposed upon purchasers at a rate of 15 percent of the average market price, instead of retail selling price, to be collected by a distributor from a cannabis retailer;
(3) requires a distributor or a manufacturer to collect the cultivation tax from a cultivator, and a manufacturer to remit any cultivation tax collected from a cultivator to a distributor, for distributor remittance of those taxes to the CDTFA; and
(4) makes other corrections and other conforming changes. The CTL was further amended by AB 133 in 2017 to, in part: remove the requirement that a cannabis retailer display the cannabis excise tax separately from the price of cannabis and cannabis products when sold to consumers; remove the requirement that a cannabis retailer state on the purchase invoice that the cannabis cultivation tax is included in the total amount of the invoice; and authorize the CDTFA to prescribe other means to display the cannabis excise tax on an invoice, receipt, or other document from a cannabis retailer given to the purchaser. AB 133 also defines manufacturer and authorizes the CDTFA to relieve a person of the penalty for failure to pay the cannabis cultivation and excise tax if the CDTFA finds that the person’s failure to make a timely payment is due to reasonable cause and circumstances beyond the person’s control, and occurred notwithstanding the exercise of ordinary care and the absence of willful neglect.