§ 5716. Homogeneity Testing of Edible Cannabis Products (a) The laboratory shall analyze a sample of edible cannabis product that contains more than one serving per unit to determine whether the edible cannabis product is of homogeneous THC content. (b) The laboratory shall perform homogeneity testing when the first batch of edible cannabis product is tested before entering the retail market. Once the initial batch of the product passes homogeneity testing, and provided that the process for manufacturing and the composition of the edible cannabis product remains the same, a batch of edible cannabis product shall be tested for homogeneity every 6 months thereafter. (c) A sample of edible cannabis product shall be deemed to have passed homogeneity testing if the relative standard deviation of THC concentration between the samples collected does not exceed plus or minus 10%. (d) If a sample fails homogeneity testing, or the laboratory fails to perform homogeneity testing as required by this section, the batch from which the sample was collected fails homogeneity testing and may not be released for retail sale. (e) If a sample passes homogeneity testing, the laboratory shall perform all other analyses required under this chapter. Authority: Section 26013, Business and Professions Code. Reference: Sections 26100, 26104 and 26110, Business and Professions Code.
During Small Business Week, the Internal Revenue Service is highlighting tax reform changes that impact depreciation and expensing for nearly every business. In some cases, these changes allow small business owners and the self-employed to write off the cost of machinery, equipment and other property more quickly.[Read more…]
Some taxpayers may need to amend their tax return
Taxpayers who discover an error after filing may need to amend their tax return. Taxpayers should file an amended return if there’s a change in filing status, income, deductions or credits.
The IRS may correct mathematical or clerical errors on a return. They also may accept returns without certain required forms or schedules. In these instances, there’s no need to file an amended return. [Read more…]
Distributors or microbusinesses authorized to operate as distributors are required to calculate and collect the 15 percent cannabis excise tax from cannabis retailers on the sale or transfer of cannabis or cannabis products (cannabis) based on the average market price of the cannabis. In a nonarm’s length transaction, generally when a cannabis retailer is also the distributor, the average market price of the cannabis is equal to the gross receipts, and the 15 percent cannabis excise tax is applied to the gross receipts of the retail sale of the cannabis.
What is included in gross receipts?
Gross receipts include all charges related to the sale of cannabis, such as labor, services, and certain transportation charges. For example, as a retailer, when you deliver cannabis to your customers using your own vehicles and there is no explicit written agreement prior to the delivery that passes title to the purchaser before delivery, the charge for that delivery is included in the gross receipts subject to the cannabis excise tax. Additionally, if you add a separate amount to your customers’ invoices or receipts to cover a cannabis business tax required by your city, that amount is included in the gross receipts subject to the cannabis excise tax.
You are a licensed microbusiness authorized to cultivate, distribute, and make retail sales of cannabis. You sell cannabis flowers to your retail customers for $35.00 per eighth of an ounce and charge $5.00 for delivery. You have an 8.5 percent sales tax rate and a 10 percent business tax. In this nonarm’s length transaction, the average market price is your gross receipts from the retail sale of the cannabis flowers.
Excise tax calculation:
|Selling price of cannabis||$35.00|
|Cannabis business tax||$3.50|
|Subtotal ($35.00 + $3.50 + $5.00)||$43.50|
|Excise tax ($43.50 x 15%)||$6.53|
Sales tax calculation:
|Subtotal ($43.50 + $6.53)||$50.03|
|Sales tax ($50.03 x 8.5%)||$4.25|
|Total due ($50.03 + $4.25)||$54.28|
The distribution part of your business is responsible for reporting and paying the cannabis excise tax of $6.53 ($43.50 × 15%) to the CDTFA on your cannabis tax return along with the cultivation tax that is due on the cannabis flowers that entered the commercial market. The cannabis retail part of your business is responsible for reporting and paying the sales tax of $4.25 ($50.03 x 8.5%) to the CDTFA on your sales and use tax return.
This email is intended to give you an overview of how the cannabis excise tax is calculated in a nonarm’s length transaction and does not address all requirements for the cannabis industry. We encourage you to read our online Tax Guide for Cannabis Businesses, or contact us at www.cdtfa.ca.gov/contact.htm.
While President Donald Trump marked the Agriculture Improvement Act of 2018 legitimizing hemp out of the blue since 1970, the enactment doesn’t sanction all types of cannabidiol (CBD), a non-inebriating part of both hemp and pot.
The Farm Bill, which was marked Dec. 20, 2018, and produces results Jan. 1, 2019, will open a conduit of new research and generation of hemp-based items, hemp industry specialists anticipated.
The law expels hemp from its prior status as a controlled substance. Rather than oversight by the U.S. Equity Department and its Drug Enforcement Agency (DEA), the U.S. Nourishment and Drug Administration (FDA) will manage the plant.
For reasonable purposes, hemp will be dealt with like some other horticultural item. The law permits the exchange of hemp-inferred items crosswise over state lines for business and different purposes and allows the deal, transport, assembling and ownership of hemp-determined items — with a few limitations.
Be that as it may, the FDA keeps on directing items containing cannabis-inferred mixes. Under the new law, the cannabis plant characterized as hemp can’t contain more than 0.3 percent THC, which implies it won’t get purchasers high.
FDA will Scrutinize Health Claims
Soon after the bill was marked, FDA Commissioner Dr. Scott Gottlieb issued an announcement affirming the office’s oversight of hemp and aim to look for pathways to legitimize the closeout of CBD in nourishments and different items. Gottlieb likewise pledged to nearly examine items that could present wellbeing dangers to buyers and guaranteed to issue alerts and take requirement activities if vital.
Gottlieb said he is worried about unconfirmed wellbeing claims made about items including CBD and different cannabis intensifies that have not been affirmed by the FDA, for example, guaranteeing helpful advantages. He said that items that guarantee to fix, treat, or forestall infections, including malignant growth or Alzheimer’s illness, must experience broad medication endorsement forms.
Gottlieb said it’s as yet illicit to bring CBD or THC into sustenance items planned for interstate trade or to showcase CBD or THC items in dietary enhancements without FDA endorsement. Yet, he brought up that in June 2018, the FDA endorsed a medication, Epidiolex, containing CBD to treat seizures in two types of uncommon epilepsy.
Hempseed Generally Recognized as Safe
He noticed that some hemp-related items don’t contain CBD or THC, and won’t pull in the equivalent administrative investigation. Gottlieb said the organization has assessed three Generally Recognized as Safe (GRAS) sees distinguishing hulled hempseeds, hempseed protein and hempseed oil as protected. Those items can be lawfully advertised in human nourishments without further sustenance added substance endorsements, as long as makers agree to ordinary FDA necessities and don’t issue unconfirmed wellbeing or treatment claims.
Hemp can be utilized to create in excess of 25,000 unique items and to make existing items more grounded and more sustainable.The three noteworthy segments of the plant are the fiber, grain, and CBD segment. Hemp fiber preparing will offer the best assembling potential, bringing up that European vehicle makers have depended on hemp for a considerable length of time to make various vehicle parts.
Hemp is an economical yield requiring no pesticides or synthetic information sources, is dry season tolerant, and can be developed in various atmospheres.
Cannabis and hemp makers were elated by the legitimization of hemp, however perceived the lawful obstructions confronting CBD items.
For quite a long time American business people have gone to Canada to research and deliver hemp items on the grounds that the plant was adequately restricted in the U.S.
Presently there will be increasingly American institutional cash supporting American organizations that will profit by the Farm Bill opening ways to developing hemp-related organi
The Occupational Safety & Health Administration (OSHA) is becoming active in Colorado and has plans to inspect even more marijuana businesses in 2018. Even though marijuana businesses may not be federally supported, owners still must adhere and comply to all federal laws and regulations for protecting their employees. Under the OSHA law, employers have a responsibility and obligation to provide a safe workplace.
As many marijuana businesses have grown rapidly, faster than regulatory authorities can keep up, compliance with OSHA is critical for a marijuana business to survive. Fines and citations proposed from OSHA are usually significant and can often close down businesses that are unable to absorb the financial impact.
Here are the top 5 OSHA Infractions observed via Adherence Compliance inspections in 2018:
- The facility does not have a written Hazard Communication Plan that describes how it achieves compliance with: 1) labels on hazardous containers; 2) MSDSs for all chemicals and pesticides; and 3) hazardous chemical training for employees.
- All relevant employees have not been trained on hazardous materials in use at the facility prior to their initial work assignment and when new hazards are introduced, and documented as required.
- The facility does not have a formal fire prevention plan (written with more than 10 employees) that addresses major hazards in the facility, accumulation of waste material, maintenance of heat-producing equipment and names and titles of employees responsible for various parts of the plan.
- Required Personal Protective Equipment (PPE) has not been evaluated and documented, along with associated training plans and verification for employees.
- The facility does not have required OSHA documentation related to workplace injury, OSHA Form 300, or Form 301 if injuries have occurred, on file
How Can Businesses Prepare?
The most viable, low-cost option is to hire a reputable 3rd party compliance inspection company to review overall compliance and support your internal team. The process should be automated and provide a detailed compliance report to track and monitor areas of compliance. Any areas where these items are missing or lacking usually requires a deeper inspection where additional infractions may be uncovered. One violation often leads to another. Contact Adherence to learn more.
Tips for Taxpayers Who Need to Amend a Return
Taxpayers who discover they made a mistake on their tax returns after filing can file an amended tax return to correct it. This includes changing the filing status and dependents, or correcting income, credits or deductions. The instructions for Form 1040X, Amended U.S. Individual Income Tax Return, list more reasons to amend a return. Taxpayers should not file an amended return to fix math errors, because the IRS will correct those.
Here are some tips on how a taxpayer amends a tax return. Taxpayers should:
- Complete and mail the paper Form 1040X, Amended U.S. Individual Income Tax Return, to correct errors to an original tax return the taxpayer has already filed. Taxpayers can’t file amended returns electronically and should mail the Form 1040X to the address listed in the form’s instructions. However, taxpayers filing Form 1040X in response to a notice received from the IRS, should mail it to the address shown on the notice.
- Prepare Form 1040X. Many taxpayers find the easiest way to figure the entries for Form 1040X is to make the changes in the margin of the original tax return and then transfer the numbers to their Form 1040X indicating the year they are amending. Use the second page of Form 1040X in Part III to explain the changes.
- Know when not to amend. Aside from math errors, taxpayers also do not need to amend their return if they forgot to include a required form or schedule. The IRS will mail a request to the taxpayer, if needed.
- Use separate forms for each tax year. Taxpayers amending tax returns for more than one year will need a separate 1040X for each tax year. Mail each tax year’s Form 1040X in separate envelopes.
- Wait to file for corrected refund for tax year 2017. Taxpayers should wait for the refund from their original tax return before filing an amended return. It is okay to cash the refund check from the original return before receiving any additional refund.
- Pay additional tax. Taxpayers filing an amended return because they owe more tax should file Form 1040X and pay the tax as soon as possible. This will limit interest and penalty charges.
- File within three-year time limit. Generally, to claim a refund, taxpayers must file a Form 1040X within three years from the date they timely filed their original tax return or within two years from the date the person pays the tax – usually April 15 – whichever is later.
Track an amended return. Taxpayers can track the status of an amended return three weeks after mailing using “Where’s My Amended Return?” Processing can take up to 16 weeks
The Internal Revenue Service today reminded small business owners who work from a home office that they may be overlooking a common deduction.
The IRS encourages small business owners to explore the guidelines surrounding home office deductions so they understand the legal guidelines and options available. More details are available in Publication 587.
As part of National Small Business Week (April 29-May 5), the IRS is highlighting a series of tips and resources available for small business owners. For someone considering claiming the home office deduction, there are two options available:
The first option for calculating the home office deduction is the regular method. This method requires computing the business use of the home by dividing the expenses of operating the home between personal and business use. Direct business expenses are fully deductible and the percentage of the home floor space used for business is assignable to indirect total expenses. Self-employed taxpayers file Schedule C, Profit or Loss From Business (Sole Proprietorship), and compute this deduction on Form 8829, Expenses for Business Use of Your Home.
The second option, the simplified method, reduces the paperwork and recordkeeping burden. The simplified method has a prescribed rate of $5 a square foot for business use of the home. There is a maximum allowable deduction available based on up to 300 square feet. Choosing this option requires taxpayers to complete a short worksheet in the tax instructions and enter the result on the tax return. There is a special calculation for daycare providers. Self-employed individuals claim the home office deduction on Schedule C, Line 30, and farmers claim it on Schedule F, Profits or Loss from Farming, Line 32.
Regardless of the method used to compute the deduction, business expenses in excess of the gross income limitation are not deductible. Deductible expenses for business use of a home include the business portion of real estate taxes, mortgage interest, rent, casualty losses, utilities, insurance, depreciation, maintenance and repairs. In general, expenses for the parts of the home not used for business are not deductible.
Deductions for business storage are allowed when the home is the only fixed location of the business, or for regular use of a residence for daycare services; exclusive use isn’t required in these cases.
You are subject to the same requirements as an independent/third party distributor if you are a cannabis business licensed as a microbusiness that is authorized to engage in distribution, or if you hold multiple cannabis license types to operate as a distributor as well as a cultivator and/or manufacturer. This email explains how and when to report the cultivation tax if you are a distributor that obtains cannabis or cannabis products from a related or affiliated cultivator and/or manufacturer.
Cultivator supplies cannabis to a related/affiliated manufacturer
If you are a microbusiness that cultivates and manufactures cannabis, or a related/affiliated cultivator and manufacturer, you are responsible for calculating the cultivation tax due based on the weight and category of the cannabis that you transfer from the cultivation part of your business to the manufacturing part of your business.
Manufacturer supplies cannabis products to a related/affiliated distributor
As a manufacturer, you are responsible for keeping track of the weight and category of the cannabis used to make a cannabis product. You should provide the weight and category of the cannabis to your related/affiliated distributor.
Distributing cannabis or cannabis products for a related/affiliated cultivator or manufacturer
As a distributor who distributes cannabis or cannabis products for a related/affiliated cultivator or manufacturer, you are responsible for keeping track of the weight and category of the cannabis or cannabis products. If you are also the distributor who arranges for the required testing and you conduct the quality assurance review, then you are responsible for reporting the weight and category of the cannabis or cannabis products entering the commercial market and paying the cultivation tax due to the California Department of Tax and Fee Administration (CDTFA) on the cannabis tax return.
When to report and pay the cultivation tax
- Distributors are required to report and pay the cultivation tax to the CDTFA during the reporting period that the cannabis or cannabis products passes the required testing and quality assurance review and is considered to have entered the commercial market.
- The electronic return and payment of the cultivation tax is due the last day of the month following the reporting period. For example, the filing deadline for the first quarter of 2018 is due by April 30, 2018.
This email is intended to give you an overview of some of the requirements for cannabis businesses that distribute cannabis on their own behalf and does not address all requirements for the cannabis industry. We encourage you to read our online Tax Guide for Cannabis Businesses, or contact us.
IRS issues guidance on business interest expense limitations
The Treasury Department and the Internal Revenue Service (IRS) today issued Notice 2018-28, which provides guidance for computing the business interest expense limitation under recent tax legislation enacted on Dec. 22, 2017.
In general, newly amended section 163(j) of the Internal Revenue Code imposes a limitation on deductions for business interest incurred by certain large businesses. For most large businesses, business interest expense is limited to any business interest income plus 30 percent of the business’ adjusted taxable income.
Today’s notice describes aspects of the regulations that the Treasury Department and the IRS intend to issue, including rules addressing the calculation of the business interest expense limitation at the level of a consolidated group of corporations and other rules to clarify certain aspects of the law as it applies to corporations. The notice clarifies the treatment of interest disallowed and carried forward under section 163(j) prior to enactment of the recent tax legislation. Finally, the notice makes it clear that partners in partnerships and S corporation shareholders cannot interpret newly amended section 163(j) to inappropriately “double count” the business interest income of a partnership or S corporation.
Today’s notice requests comments on the rules described in the notice and also requests comments on what additional guidance should be issued to assist taxpayers in computing the business interest expense limitation under section 163(j). The Treasury Department and the IRS expect to issue additional guidance in the future.
Today’s notice, Notice 2018-28, will be published in IRB 2018-16 on April 16, 2018. The Treasury media contact for this matter is Marisol Garibay, Deputy Assistant Secretary for Public Affairs, 202-622-6490.