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Archives for March 2018

Staying Compliant with California’s Cannabis Product Packaging Regulations

Whenever states legalize cannabis—whether for recreational or medical use—the market is always governed by a significant amount of laws.  Some of these laws are common sense, while others seem arbitrary.  If you are operating in California, you need to abide by packaging laws that are a little bit of both.  To help you understand what you need to do to stay legal, keep the following in mind.

 

Make Certain Products Are in Child-Resistant Packaging

When it comes to debate on legalization, one of the main points raised against it is that it will lead to children using marijuana.  While studies of legal markets have shown a decrease in underage use after legalization, the concern still is and likely always will be present.  In an effort to address these concerns, California mandates that all cannabis products are in child-resistant packaging.

And keep in mind that simply claiming packaging is child-resistant is not enough; it must be certified as child resistant.  If it is not, it is not in compliance.  Also, if the product has multiple servings, it must be in packaging that can be resealed after opening.

 

Mylar Exit Bags Are a Child Resistant Safety Net

While the child-resistant packaging mandate seems pretty common sense, you may not have the right containers in stock.  Rather than waiting until you are able to get the right containers, you can use Mylar exit bags.  As long as the products are inside of the bag and sealed before the customer exits the store, you are in compliance with the law—assuming the bags you use are certified as child-resistant.

 

Steer Clear of Anything That Could Be Seen as Targeting Children

As you are no doubt noticed, a lot of the packaging laws are meant to protect children.  With this one, the idea is to avoid packaging (and products, like gummy edibles) that some might interpret as targeting children.  This means no cartoons on the packaging, as you might imagine, but it also encompasses things like certain fonts and phrases that are seen as appealing to children.

 

Stick with Tamper-Evident Packaging

Once upon a time, tamper-evident packaging didn’t exist.  However, after some high-profile tampering cases in the early 1980s, it became standard for medications, foods, and more.  So it comes as no surprise that the State of California wants legal cannabis products sold in tamper-evident packaging.  Some options you can use are shrink bands and mylar bags that are heat sealed.

 

Every Product Must Have Two Labels

These are called the “primary panel” and the “information panel,” and they must be affixed to the packaging of any cannabis product sold in the state.  Here is what each panel must contain.

Primary Panel:

  • Product name or ID in text sized relative to the most prominent text on the packaging
  • The specific phrase “cannabis-infused” in bold lettering larger than the product name or ID and placed above the product name or ID
  • The THC symbol adopted by the State of California—more about this in a bit
  • The net weight and/or volume of the product
  • The THC and CBD content in the product, expressed in milligrams per package
  • The THC and CBD content per serving, expressed in milligrams per serving

The font for this panel must be size 6 or greater while remaining in balance with the size of the panel and the container as a whole.

Information Panel:

  • The name and contact information for the licensed manufacturer who produced the product
  • The date of creation and packaging
  • The following warning in bold print:
    • GOVERNMENT WARNING: THIS PRODUCT CONTAINS CANNABIS, A SCHEDULE I CONTROLLED SUBSTANCE. KEEP OUT OF REACH OF CHILDREN AND ANIMALS. CANNABIS PRODUCTS MAY ONLY BE POSSESSED OR CONSUMED BY PERSONS 21 YEARS OF AGE OR OLDER UNLESS THE PERSON IS A QUALIFIED PATIENT. THE INTOXICATING EFFECTS OF CANNABIS PRODUCTS MAY BE DELAYED UP TO TWO HOURS. CANNABIS USE WHILE PREGNANT OR BREASTFEEDING MAY BE HARMFUL. CONSUMPTION OF CANNABIS PRODUCTS IMPAIRS YOUR ABILITY TO DRIVE AND OPERATE MACHINERY. PLEASE USE EXTREME CAUTION.

 

Differentiate Between Medical and Recreational Use Products

If you are selling products for medical use, they must include the statement “FOR MEDICAL USE ONLY” on their packaging.  In addition to the items listed above, the information panel must also include the following:

  • A full list of all product ingredients in descending order as constituted by weight or volume
  • Instructions on using the product such as dosage and preparation
  • A use-by or best-by date
  • The product’s unique identifier and, when available, batch number

 

Edibles Also Require Special Items on the Information Panel

  • A full list of all ingredients, measured by weight or volume and sorted from greatest to least
  • Should the product contain a common food allergen, the word “CONATINS” in bold font and then a list of the allergens the product contains
  • The names of all artificial food colorings used
  • The sodium, sugar, carbohydrate, and total fat per serving with measurements in grams

In terms of packaging, all edibles must be sold in opaque packaging.

 

California’s Required THC Label

This label must be displayed on all cannabis product packaging in California.  The requirements for this label are as follows:

  • The color and shape must exactly replicate the design authorized by the state; if packaging is dark, a contrasting color can be used
  • The minimum size for the label is 0.5 inch by 0.5 inch
  • It must be clearly printed
  • It must be prominently featured

What You Cannot Add to Your Packaging

The following items are banned from being added to cannabis product packaging in California:

  • Unverifiable claims that the ingredients in a product or the product itself was grown in a specific California county
  • Any information that might be construed as false or misleading, especially those related to health and wellness

While there are many laws you must follow, they are pretty easy to abide by and should not have a significant impact on your bottom line.

 

Special Thanks to Marijuana Retail Report for Content Share

How to Collect the Cannabis Excise Taxes

Information for Cannabis Retailers
How to Collect the Cannabis Excise Tax from your Customers on Retail Sales

Beginning January 1, 2018, cannabis distributors are required to calculate and collect the cannabis excise tax from you on cannabis or cannabis products that they sell or transfer to you. In an arm’s length transaction, your distributor calculates the cannabis excise tax based on the “average market price,” which is computed by applying the CDTFA’s predetermined markup rate (currently at 60 percent) to the wholesale cost of the cannabis and cannabis products sold or transferred. Your distributor will provide you with an invoice or receipt that contains the following:

  • Your name, as the licensee receiving the product,
  • The distributor’s name,
  • The unique identifier associated with the cannabis or cannabis products, and
  • The amount of cannabis excise tax paid.

Although your cannabis distributor is required to use the predetermined markup rate to compute the average market price in an arm’s length transaction, the predetermined markup rate is not meant or required to be used by you to determine your selling price of cannabis or cannabis products.

When you sell cannabis or cannabis products, you are required to collect the cannabis excise tax from your customer. The easiest way is to include the cannabis excise tax that you paid to your distributor in the selling price to your customer. You are not required to itemize the amount of cannabis excise tax collected from your customer on the receipt; however, you must include the following statement on the invoice or receipt,

“The cannabis excise taxes are included in the total amount of the invoice.”

You are not required to reconcile the average market price the distributor calculates for determining the excise tax with your retail selling price of cannabis or cannabis products.

Remember, unless there is an applicable exemption, sales tax is due on your retail sales of cannabis or cannabis products and is computed on your retail selling price, including the cannabis excise tax.

This post is intended to give you an overview of some of the requirements for cannabis retailers and does not address all requirements for the cannabis industry. We encourage you to read our online

Get quick answers to tax questions

Tax Time Guide: Make IRS.gov first stop to get quick answers to tax questions

WASHINGTON — With the April 17 tax deadline fast approaching, taxpayers can find most answers to their tax questions by taking advantage of the wide variety of easy-to-use online tools available on IRS.gov.

This is the eighth in a series of nine IRS news releases called the Tax Time Guide, designed to help taxpayers navigate common tax issues.

Already this year, visits to IRS.gov have jumped 21 percent over the same time last year. Join the millions of taxpayers who have discovered that the agency’s website offers the fastest way to get last-minute tax help. By taking advantage of the many online tools, taxpayers can quickly check the status of their tax refund, get answers to tax questions or prepare and file their taxes around the clock.

Taxpayers get the same answers on IRS.gov as if they’d called and spoken with an IRS representative, and they can print out the answers to keep for reference and their records. IRS information and many tools are also available in Spanish.

Below are some of the most common tax queries and the tools to find answers:

Where’s my refund?

By using the “Where’s My Refund?” tool available on IRS.gov and on the official IRS mobile app, IRS2Go, taxpayers can easily find the most up-to-date information about their tax refund. Taxpayers can start checking on the status of their return within 24 hours after the IRS acknowledges receipt of a taxpayer’s e-filed return or four weeks after the taxpayer mailed in a paper return. The system is updated daily, so there’s no need to check more often.

Free help preparing a tax return.

Through the Volunteer Income Tax Assistance and Tax Counseling for the Elderly (VITA/TCE) programs, eligible taxpayers can get free, local, one-on-one help to prepare and file their taxes. The several thousand community-based sites are staffed by IRS trained and certified volunteers. Low- and moderate-income taxpayers and those age 60 and above can find the nearest site on IRS.gov’s VITA/TCE Site Locator.

Do it yourself for free.

Taxpayers that prefer to do their own taxes can find free tax preparation help on IRS.gov. The IRS Free File program, available only through IRS.gov, offers 12 brand-name tax preparation software packages for free to the 70 percent of taxpayers who earned $66,000 or less in 2017. The software does all the work of finding deductions, credits and exemptions for which the taxpayer qualifies. Taxpayers who earned more than $66,000 in 2017 and are comfortable preparing their own taxes can use Free File Fillable Forms. This electronic version of paper IRS tax forms is also used to file tax returns online.

Searching for a tax professional?

The searchable directory on IRS.gov helps taxpayers find a tax professional in their area. The list can be sorted by credentials and qualifications. Tax return preparers have differing levels of skills, education and expertise, so taxpayers should choose wisely and keep in mind that the taxpayer is ultimately responsible for the accuracy of their return.

Getting a tax return transcript?

Those who need a copy of their tax return can use the online tool, Get Transcript. It’s free and available on IRS.gov. Taxpayers can view, print or download their tax transcripts for the most current tax year after the IRS has processed the tax return.

Instant answers to tax law questions.

Many tax law questions can be answered quickly when using any of several tools on IRS.gov:

Need to make a payment?

IRS Direct Pay offers taxpayers the fastest and easiest way to pay what they owe. This free online system allows individuals to securely pay their tax bills or make quarterly estimated tax payments directly from checking or savings accounts without fees or pre-registration. See IRS.gov/Payments for information on this and other payment options.

Can’t pay a tax bill?

For taxpayers concerned about a tax bill they can’t pay, the Online Payment Agreement tool can help determine if they qualify for a payment plan with the IRS.

The Offer in Compromise Pre-Qualifier can help determine if a taxpayer qualifies for an Offer in Compromise. An Offer in Compromise is an agreement with the IRS that settles a person’s tax liability for less than the full amount owed.

Questions about an amended return?

The “Where’s My Amended Return?” tool provides the status of an amended tax return, Form 1040X. Taxpayers can check on the current year 1040X and up to three prior years. Allow up to three weeks after filing to check on the initial status, and up to 16 weeks for processing.

Taxpayers can find answers to questions, forms and instructions and easy-to-use tools online at IRS.gov 24 hours a day, seven days a week. No appointments required and no waiting on hold.

Medical and Retail/Adult-Use Marijuana Cultivation Infractions

Here is our updated Top 5 listing for Medical and Retail/Adult-Use Marijuana Cultivation Centers for 2018:

  1. The licensee/business does not reconcile all on-premises marijuana and marijuana product inventories at the close of business each day.
  2. The facility has not properly documented all waste and waste removal for disposal.
  3. The facility does not document material changes (updates) required for Standard Operating Procedures.
  4. The facility does not complete inventory of material safety data sheets where the product is used and/or stored.
  5. The facility does not maintain an up-to-date Chemical and Pesticide Application Log (document & record).

Inventory is the most common infraction across all license types (e.g. dispensaries, cultivation centers, manufacturers, distributors, testing centers). Regulators review aging reports for each phase – immature, vegetative, flowering, harvest, drying, curing & transport.

Waste includes plant, water and chemical/pesticide waste. Ensure the facility has accurate logs for all types of waste. Prepare for federal, state, county and city inspections.

Tips for Using the Withholding Calculator

Tips for Using the Withholding Calculator

The IRS recommends that taxpayers use the Withholding Calculator on IRS.gov to do a “paycheck checkup” to check that their employers withhold the correct amount of income tax from their paychecks.

The Withholding Calculator can help prevent employees from having too little or too much withheld from their paycheck. Having too little tax withheld can mean an unexpected tax bill or potentially a penalty at tax time in 2019. And with the average refund topping $2,800, some taxpayers might prefer to have less tax withheld up front and receive more in their paychecks.

Here are some tips for using the Withholding Calculator. Taxpayers should:

  • Use their most recent pay stubs and federal income tax return to help estimate income and other items for 2018. Keep in mind the new tax law made significant changes to itemized deductions.
  • Fill in all information that applies to their situations.
  • Make estimates when necessary, but keep in mind the results are only as accurate as the information entered.
  • Check the information links embedded in the program whenever ttaxpayers have questions.
  • Print the final screen that summarizes their entries and the results. Use the results from the Withholding Calculator to determine if they should complete a new Form W-4, Employee’s Withholding Allowance Certificate.

Remember, the Withholding Calculator does not ask the user for personally identifiable information, such as name, social security number, address, or bank account numbers. The IRS does not save or record the information the taxpayer enters in the calculator.

Tax Time As A Legal Marijuana Business

Many accountants do not know how to handle the disparity between state and federal law and how they impact the approach you take when filing taxes. As a business owner, you may not know what to do either.  While it is advisable that you seek out the help of an accountant who specializes in assisting cannabis business owners, it is also important that you understand tax law and how it affects you.

Filing Taxes at the State Level

Because your business is legal within the state or states you are operating in, filing state taxes is pretty straightforward.  In general, you are treated like any other business.  The biggest concern here is whether or not there are special taxes that the state applies specifically to your industry or the products you sell.  Make sure to follow the instructions of your CPA, CFO, or financial consultant as to what taxes apply to your specific location. As long as you understand the tax laws and follow them, all should be well.

 

Filing Taxes at the Federal Level: Section 280E

The federal government does not currently acknowledge state law regarding substances they classify as Schedule I or Schedule II drugs.  This crosses over to all federal agencies, including the IRS.  As marijuana is classified as a Schedule I drug, cannabusinesses are required to follow tax code written for businesses that traffic Schedule I drugs.

These businesses file under section 280E.  This begins by classifying your income as illegal on your federal tax return.  From there, you need to be very careful about any deductions you list.

For most businesses, taxes are paid on net income, which is revenue minus expenses.  But since deductions are highly restricted for businesses that are considered to traffic Schedule I drugs, you will not be able to write off the majority of your expenses.  In fact, only the cost of goods sold (COGS) can be deducted.

COGS is restricted to the expenses of the production of a product.  If you are a cannabis producer, this means the seeds, soil, water, plant food, and whatever expenses are incurred when cultivating or harvesting the plants.  While any deduction helps, this leaves much of your expenses ineligible for writing them off.

So, what are expenses you cannot write off?  Those associated with distribution, sales administration, management, marketing, overhead, and support.  These expenses are things like rent, employee expenditures, accounting, and more.  This means that compared to companies in other industries, your tax burden is significant, and it can turn what would be a profitable venture into one that is operating in the red.

 

Best Practices in Filing Taxes

Under section 263A of the Internal Revenue Code, you can allocate certain indirect expenses to COGS under defendable allocation methodologies.  However, this is tricky to do and is better done by a knowledgeable accountant.  This will allow you to lower your tax burden somewhat.

You also need to be diligent about tracking expenses by category.  If you make legal deductions but do not have solid records backing you up, the deductions may not be allowed.  It is also recommended that you pay quarterly tax payments to reduce the risk of penalties.

Until federal law changes, legal cannabis companies will be left paying more taxes than businesses in other industries.  However, if you work with a professional accountant who specializes in working with cannabusinesses, you can get the most out of filing your taxes and keep your business profitable.
Thanks to  the Marijuana Retail Report for “content share”.

 

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Taxpayers Should Report Name Changes Before Filing Taxes

Taxpayers Should Report Name Changes Before Filing Taxes

When a taxpayer changes their name, that change can affect their taxes. All the names on a taxpayer’s tax return must match Social Security Administration records. A name mismatch can delay a tax refund. Here’s what a taxpayer should do if anyone listed on their tax return changed their name:

  • Reporting Taxpayer’s Name Change. Taxpayers who should notify the SSA of a name change include:
    • Taxpayers who got married and use their spouse’s last name.
    • Recently married taxpayers who now use a hyphenated name.
    • Divorced taxpayers who now use their former last name.
  • Reporting Dependent’s Name Change. Taxpayers should notify the SSA if a dependent’s name changed.  This includes an adopted child who now has a new last name. If the child doesn’t have a Social Security number, the taxpayer may use a temporary Adoption Taxpayer Identification Number on the tax return. Taxpayers can apply for an ATIN by filing a Form W-7A.
  • Getting a New Social Security Card. Taxpayers who have a name change should get a new card that reflects a name change. File Form SS-5, Application for a Social Security Card. Taxpayers can get the form on SSA.gov or by calling 800-772-1213.

 

California threatens Weedmaps over promotion of illegal cannabis shops

California’s cannabis czar issued a cease and desist order to Weedmaps, directing the Irvine internet company that maps marijuana dispensaries to immediately stop promoting businesses that don’t have state licenses.

“You are aiding and abetting in violation of state cannabis laws,” states the letter from Lori Ajax, chief of the Bureau of Cannabis Control.

If the company doesn’t immediately drop advertisements for unlicensed businesses, Ajax said Weedmaps could face criminal and civil penalties, including civil fines for each illegal ad.

The warning is the only cease and desist letter sent by the state to an advertising company, according to bureau spokesman Alex Traverso. But it’s one of more than 900 such letters sent by his agency to unlicensed marijuana businesses since recreational weed sales were allowed to start and licensing requirements kicked in Jan. 1.

Traverso said many of those 900-plus black market shops were discovered on Weedmaps.

Tustin resident Justin Hartfield founded Weedmaps in 2007 with company CEO Doug Francis. The site and its app help visitors find dispensaries and browse their menus, with shops rated much like other businesses are rated on Yelp.

Weedmaps has grown into an international juggernaut, with offices from Denver to Berlin. But much of that business has been built on ad revenue from unlicensed dispensaries. For example, on Wednesday, the app included 20 ads for marijuana dispensaries in Anaheim, even though all cannabis businesses are banned in that city.

Weedmaps didn’t immediately respond to a request for comment on the letter. But during a February interview, company president Christopher Beals remained defiant on the issue of accepting ads from black market shops.

“The thing is, at the end of the day, we’re an information platform,” Beals said. “We’re showing the same information that Google and Yelp and Craigslist and 30 other websites are showing.”

“To sort of say, ‘Let’s pretend an illegal market doesn’t exist’ or that people can’t just type ‘dispensary’ into Google and find this information… isn’t really realistic.”

A Weedmaps competitor, Leafly.com – which also maps dispensaries along with ranking strains and offering other cannabis-related information – announced it was ditching ads from unlicensed shops as of March 1.

“The California state government has made clear that only licensed retailers and delivery services may advertise via technology platforms,” stated a Feb. 7 press release from Leafly announcing the decision.

Ajax sent Weedmaps the cease and desist letter on Feb. 16. Industry news site Marijuana Business Daily first reported the news Wednesday.

The letter explains that, under Senate Bill 94, any ads for marijuana retailers must include a California license number showing they’re permitted by state and local authorities. The number also ensures that, when regulations are fully in place later this year, all cannabis sold by that retailer has been tested for safety, properly labeled and more.

“This differs in no way than requiring a contractor to list their state contractor’s license number or a real estate broker to list their license number,” said Aaron Herzberg, a cannabis industry attorney who’s part owner of two licensed shops in Santa Ana.

Herzberg pushed to have the advertising language written into state law after personally seeing how difficult it was for legal shops to compete with the gray market while companies like Weedmaps made no attempt to help shoppers distinguish between the two.

“We’re starting to see more and more licensed cannabis businesses that invest millions of dollars and go through the process to do things the right way and to pay their taxes — which they have to pay a lot of — those businesses are demanding that individuals who don’t follow the law be put out of business,” Herzberg said.

Of the more than 900 cease and desist letters sent to California businesses, Traverso said around 375 were in response to complaints his agency has received.

Herzberg sees the lack of compliance by Weedmaps as ironic, considering the Irvine company was one of the biggest financial backers of legalizing and regulating marijuana in California through Proposition 64. The company also supports regulation efforts throughout the country and overseas.

Before Prop. 64 fully kicked in Jan. 1, Herzberg said Weedmaps may have had somewhat of a leg to stand on, since there was no licensing system in place to readily distinguish between illegal shops and dispensaries that were arguably allowed under California’s medical marijuana laws. That’s akin to the argument used in the past by companies like Backpage.com when it was pressured to police prostitution rings using its website to front as escort services.

But now that all marijuana businesses in California are required to provide their state license numbers, Herzberg said the only justification for continuing to run ads without them would seem to be a financial one.

“I think that Weedmaps is being a very poor corporate citizen,” he said. “It just undermines under the system of regulation that Weedmaps was a proponent for in the first place.”

Sacramento officials also wrote a letter in early February calling for both Weedmaps and local newspaper Sacramento News & Review to stop promoting unpermitted shops in their city, the Sacramento Business Journal reported. A city official there told Marijuana Business Daily that they hadn’t heard back from the company as of Wednesday.

Ajax has said that her agency planned to give companies time to adjust to the state’s new marijuana laws before it started enforcement proceedings.

“As of right now, like with the unlicensed operators, we’re communicating with Weedmaps,” Traverso said. “There is no immediate action planned.”

In the meantime, it looks like business as usual at Weedmaps.com, with hundreds of dispensaries listed throughout the state even though our database of local policies shows they’re permitted in fewer than 20 percent of California cities.

 

Special Thanks to Brooks Staggs and the OC Rregister for content share

Check Status of a Tax Refund in Minutes Using Where’s My Refund?

Check Status of a Tax Refund in Minutes Using Where’s My Refund?

The Where’s My Refund? tool gives taxpayers access to their tax return and refund status anytime. All they need is internet access and three pieces of information:

  • Their Social Security number.
  • Their filing status.
  • The exact whole dollar amount of their refund.

Taxpayers can start checking on the status of their return within 24 hours after the IRS received their e-filed return, or four weeks after they mail a paper return. Where’s My Refund? includes a tracker that displays progress through three stages: the IRS receives the tax return, then approves the refund, and sends the refund.

Where’s My Refund? updates once every 24 hours, usually overnight. Taxpayers should remember that checking the status more often will not produce new results. Taxpayers on the go can track their return and refund status on their mobile devices using the free IRS2Go app. Those who file an amended return should check out the Where’s My Amended Return? tool.

Generally, the IRS issues most refunds in less than 21 days, but some may take longer. IRS phone and walk-in representatives can research the status of refunds only if it’s been 21 days or more since a taxpayer filed electronically, or more than six weeks since they mailed a paper return. Taxpayers can also contact the IRS if Where’s My Refund? directs them to do so.

There is a misconception that a tax transcript can help taxpayers determine the status of their refund. The information included on a transcript does not necessarily reflect the amount or timing of a refund. Transcripts are best used to validate past income and tax filing status for loan applications, and to help with tax preparation.

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