Paying Attention – Receipts?
Paying Attention – Receipts? – we are somewhat baffled and concerned having published four posts that contain over 12,000 words on a topic that is of critical importance to everyone that is involved in the “touch the plant” part of the legal cannabis industry in California. The subject is receipts and the information contained on them. It may not seem all that significant, but it has the potential to cause an incredible amount of pain and even displacement within the industry. Our observation is that very few of the receipts we have seen…whether we are talking about the receipts that cultivators get from purchasers of flower and trim to the simple receipts that retail customers receive from a dispensary purchase of an eighth have contained insufficient or incorrect information, and that is a problem, actually it is a time bomb waiting to explode.
The first piece we published was an illustration of the proper method for the calculation of taxes on cannabis, in Cannabis Tax Calculation Example. The piece highlights the substantial portion of the total cost of a cannabis purchase that taxes represent. It also highlights the significant savings available through having a Cannabis Medical Card. We have discussed the pros and cons of having a Medical Card here. We continue to be amazed that a California county hasn’t decided to capitalize on the opportunity to become a vendor of medical cards on a state-wide basis.
Paying Attention – Receipts?
The second area of concern we highlighted was the need for small cultivators to be ABSOLUTELY CERTAIN THAT THE RECEIPTS THEY RECEIVE EXPRESSLY STATE THAT THE DISTRIBUTOR OR MANUFACTURER THAT IS PURCHASING FLOWER OR TRIM FROM THEM IS ASSUMING THE LIABILITY TO PAY THE CANNABIS CULTIVATION TAX “CCT”.. If the receipt doesn’t expressly state that, the cultivator will be in for a stunning and unpleasant surprise when CDTFA seeks to collect the CCT from them. See Small Cultivators Getting Screwed?
Finally, we come to an issue that has several components, the first of which is for end consumers to make sure that the receipts thay receive from the dispensary contain the proper calculation of the cannabis taxes, and reflect proper information…we have another post coming out for consumers in next several days. The second component involves the collection of cannabis taxes by Distributors from Dispensaries, and we spend several paragraphs explaining why a better information reporting mechanism is necessary to permit Dispensaries to reconcile their payments of Cannabis Excise Tax [“CET”] to Distributors and a year-end information reporting form similar to the Federal 1098 would be very helpful.
Finally, we encourage CDTFA to either seek legislation or that they craft a Regulation which creates a “Responsible Person” mechanism for CET and CCT which is similar to Regulation 1702.5. – Responsible Person Liability that is contained in the California Sales Tax statute. The lack of a responsible person provision makes it much more difficult for CDTFA to insure that all of the CCT and CET trust fund taxes which are properly owed by Distributors are paid over. See CCT CET – Responsible Persons.
This is an incredibly complex and important topic that has potential to impact everyone, and we are very surprised at the lack of both interest and discussion…alas, once CDTFA starts auditing cannabis industry businesses we will hear the screams.