Post Tax Season Priorities – Cannabis

Post Tax Season Priorities – Cannabis

Post Tax Season Priorities – Cannabis are already bubbling up in the minds of aBIZinaBOX professionals. We won’t have any opportunity to catch our breath once the end of the tax season ends on 4/17. There are three top priorities that we will focus on:

California Dept. of Tax and Fee Administration [“CDTFA”] has released a substantial number of announcements in recent days that relate to the 1Q filings for Cannabis Excise, Cultivation and Sales Tax. We have posted two significant articles on the Excise Tax which are linked at the bottom of this post.

Post Tax Season Priorities - Cannabis
Filing Cannabis Excise Tax Returns

CDTFA has released quite a few notices which we summarize below.

  • Microbusinesses or Cannabis Businesses with Multiple Licenses Cannabis Excise Tax Requirements [em-322] – which reminds Microbusinesses that they are subject to the same cannabis excise tax collection and reporting requirements as an independent, third-party distributor if you are a cannabis business licensed as a microbusiness that is authorized to act as a distributor, or if you hold multiple cannabis licenses to operate as both a distributor and retailer. The continue by stating

“Distributor supplies cannabis or cannabis products to a related/affiliated retailer
It is considered a “non-arm’s length” transaction when you transfer cannabis or cannabis products to the retail portion of your business. In a non-arm’s length transaction, the average market price is the gross receipts from the retail sale of the cannabis or cannabis products. You are, therefore, required to calculate the excise tax based on the gross receipts (all charges related to the sale of the cannabis/cannabis products).”

  • Information for Cannabis Retailers Excise Tax on Cannabis Purchased before January 1, 2018 – If you had cannabis or cannabis products in your inventory on January 1, 2018, you are required to collect the 15 percent cannabis excise tax from your customer when you sell those items and then pay that amount to a licensed distributor with whom you have established a business relationship.
  • Important Information for Cannabis Distributors – provides an overview of the reporting and invoicing requirements for cannabis distributors as well as information on how to avoid substantial penalties for failure to pay the cannabis taxes due.
  • Guidance on How Taxes Apply to Cannabis Inventory Beginning January 1, 2018 – Beginning January 1, 2018, cannabis retailers must collect the cannabis excise tax from their customers on each retail sale of cannabis or cannabis products. The cannabis excise tax applies to all retail sales, including sales of cannabis or cannabis products the retailer purchased prior to January 1, 2018. Cannabis retailers are required to pay the cannabis excise tax to a cannabis distributor. Cannabis cultivators owe the cultivation tax on all harvested cannabis that enters the commercial market on or after January 1, 2018. The cultivation tax does not apply to harvested cannabis a cultivator transferred or sold prior to January 1, 2018. Cultivators are required to pay the cultivation tax to a distributor or manufacturer.
  • Information for Cannabis Retailers How to Collect the Cannabis Excise Tax from your Customers on Retail Sales  –

     

  • Information for Manufacturers of Cannabis Products How to Collect the Cultivation Tax and Pay it to Distributors or Other Manufacturers –

As a cannabis manufacturer, you are required to collect the cultivation tax from cultivators when the unprocessed cannabis is first sold or transferred to you based on the weight and category of the cannabis. You must then pay the cultivation tax you collected to your distributor, based on the weight and category of the cannabis that was used to produce the cannabis product, when the cannabis products are sold or transferred to the distributor for quality assurance review and testing.

If the cannabis product is sold or transferred to one or more manufacturer prior to being sold or transferred to the distributor who arranges for testing and performs the quality assurance review, the cultivation tax must be passed to the next manufacturer who takes possession of the cannabis product until the tax is remitted to the distributor based on the weight and category of the cannabis that was used to produce the cannabis products.

  • CDTFA Video – Filing A Cannabis Excise Tax Return can be found here.
  • CDTFA’s Tax Guide for Cannabis Businesses can be found here.
  • Finally, all three regulatory agencies have released new information about Annual Licenses which we will cover in our next post.
  • Our articles on the calculation of Excise Tax for flower and extraction.

Author: abizcannabis

Managing Director & CEO of integrated transactional financial advisory, tax, and technology consulting firm - aBIZinaBOX Inc New York, Chicago, and OaklandCPA.CITP.CISM.CGEIT.CGMAExpertise with: Alt. Investments/Private Equity, Real Estate, Professional Services, CA Cannabis, Tech Start-Ups and Distressed Assets/DebtTechnology Certifications including:Advanced & High Complexity Cloud Integrator AICPA PCPS, CAQ,, IMTA, CITP ISACA CGEIT, CISMState CPA Societies in California, Florida, Illinois, New York and TexasExpertise with Regulatory Compliance - US - HIPAA, FINRA, SEC Rule 17(a)(3)/(4), eDiscovery, FINCEN - EU- EBA, ESMA, EIOPA UK - BoE, PRA, FCA