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California cannabis business tax guide
California cannabis business tax guide


California cannabis business tax guide

California cannabis business taxation is a topic that is very interesting to many cannabusiness operators. Legal cannabis has been around in this state for quite some time now, and the taxes surrounding these legal operations can be confusing to understand.

This article will discuss the major parts of the cannabis tax law in California. In addition, this article should help you avoid fines and other punishments by giving you a firm understanding of your responsibilities as a marijuana business owner.

The following are some crucial facts to know about California cannabis business taxation.

The Services are Now Available 24/7 with Online Access

The California Department of Tax and Fee Administration (CDTFA) has inaugurated its online service portal. These online services are also for cannabis tax accounts.

Whether you’re making cannabis deliveries, cultivating, operating a pot shop, marketing cannabis businesses, or something else, now you can check all of your tax account details 24/7 with this information more accessible than ever before.

All Cannabis and Cannabis Products Are Taxable.

California law demands taxes on retail sales of all tangible personal property. While there might be some instances that offer exemptions, cannabis and cannabis products are in the tangible personal classification without an exemption. Thus, if someone is selling cannabis or cannabis products, they must pay the state’s sales and use tax.

canabis tax

Insights on Excise Tax and Cannabis Cultivation Tax

You must pay a 15 percent excise tax on retail sales on cannabis if the products are purchased in California. You can figure this tax according to either the average market price or by the listed price available in retail.

Additionally, cannabis cultivators may be subject to a cultivation tax upon entering the commercial market. The rate is dependent on weight and product category. There are three categories determined by regulation:

  • Cannabis Leaves
  • Cannabis Flower
  • And, Cannabis Plant

Classifying plants as fresh, dried, or processed is essential in California’s cannabis tax law. To weigh cannabis plants for the fresh plant category, you must weigh the plants within two hours of being harvested.

The CDTFA is required to adjust cultivation tax rates for inflation on an annual basis. ASSEMBLY BILL 1872, on the other hand, guaranteed to keep the cultivation tax rates fixed for the entire 2021. The CDTFA, on the other hand, intends to modify cultivation tax rates beginning in 2022.

Licensing Requirements for Conducting Cannabis Business in California

If you don’t sell tangible property as a cannabis business operator, it’s not required that you hold a seller’s permit. However, to meet the application requirements for state-wide cannabis licenses, certain documents may be requested by those certifying your license status and qualifications.

To get your cannabis certification letter, you’ll need to email the CDTFA the following information.:

  • Owner name
  • Business address
  • DBA
  • Contact name
  • Description of your canna-business activities
  • Contact phone number

Once you send your email, CDTFA will review it. If they are satisfied with what they see or find out from the confirmation of the information you provide them, then a letter for certification should be sent to your address via mail. However, if there are any additional details still needed, they’ll contact you directly.

We hope this article has given you some insights into the world of cannabis taxes. Still, we’re always happy to answer additional questions or hear about other aspects of the industry that interest you!

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