On November 8, 2016, California voters approved Proposition 64, Control, Regulate and Tax Adult Use of Marijuana Act. To align the requirements for licensing and regulation of medicinal and adult-use of commercial cannabis, Proposition 64 has been recently amended by Senate Bill (SB) 94. Among other changes, SB 94 repealed the Medical Cannabis Regulation and Safety Act (MCRSA) and included certain provisions of the MCRSA in the licensing provisions of Proposition 64. The consolidated provisions are now known as the Medicinal and Adult-Use of Cannabis Regulation and Safety Act (MAUCRSA), and the term marijuana was changed throughout the law to the term cannabis.
Effective November 9, 2016, certain sales of medicinal cannabis are exempt from sales and use tax. (See the Retailers section, under the heading, Proposition 64 Exempts Certain Medical Cannabis Sales from Sales and Use Tax)
Beginning January 1, 2018, two new cannabis taxes apply as follow:
- A 15 percent excise tax is imposed upon purchasers of cannabis and cannabis products. Retailers of cannabis and cannabis products are required to collect the 15 percent excise tax from the purchaser based on the average market price of any retail sale and pay it to their cannabis distributor.
- A cultivation tax is imposed upon cannabis cultivators on all harvested cannabis that enters the commercial market. Cannabis cultivators are required to pay the cultivation tax to either their distributor or their manufacturer. The rate of the cultivation tax is:
- $9.25 per dry-weight ounce of cannabis flowers that enter the commercial market, and
- $2.75 per dry-weight ounce of cannabis leaves that enter the commercial market.
Senate Bill (SB) 94, which was approved by the Governor on June 27, 2017, amended several provisions in the cannabis tax law as enacted by Proposition 64. SB 94 provides that:
- Distributors must collect the cannabis excise tax from retailers and the cultivation tax from cultivators or manufacturers.
- Distributors must report and pay the cannabis excise tax and the cultivation tax to the CDTFA.
Sign up for the CDTFA Cannabis Outreach email listserv to receive the latest news on cannabis tax compliance and related issues like CDTFA-issued special notices and news releases.
Helping your business succeed is important to the CDTFA. To help you better understand the tax obligations specific to your cannabis business, we have created this guide detailing the tax issues and important information relevant to your industry.
How to Use This Guide
Each section of this guide contains important information relevant to cannabis businesses. The Getting Started section provides key resources related to registration, filing returns, account maintenance, and other information cannabis business may need.
The Distributors section covers topics related to the general application of tax to purchases and sales by distributors.
The Retailers section covers topics related to the general application of tax to purchases and sales by retailers. It also has information on exemptions that retailers may qualify for and the exemption certificates required.
The Cultivators section covers topics related to the general application of tax to cultivators and processors, the available exemptions and the exemption certificates required.
The Manufacturers section covers topics related to the general application of tax to purchases and sales by manufacturers.
Lastly, the Resources section provides links to useful information, including special notices web-based seminars, publications, statutory and regulatory information, and access to assistance from our Customer Service Representatives.