Information for the Cannabis Industry: How Tax Applies to Immature Plants, Clones, and Seeds
The cultivation tax does not apply to the sale or transfer of immature plants, including clones or seeds. The cultivation tax is imposed on cultivators for harvested cannabis that enters the commercial market; however, the definition of “enters the commercial market” specifically excludes immature plants and seeds.
Immature plants, clones, and seeds are subject to the 15 percent cannabis excise tax when sold at retail. Nurseries may sell immature plants, clones, or seeds to another cannabis licensee. However, a distributor is required to transport the cannabis from the nursery to the licensee and when the immature plants, clones, or seeds are sold or transported to a retailer, the distributor is also required to collect the 15 percent cannabis excise tax from the retailer based on the average market price of the immature plants, clones, or seeds. The retailer is responsible for collecting the cannabis excise tax from their retail customers when the immature plants, clones, or seeds are sold at retail.
Sales and Use Tax
Sales tax applies to the retail sale of immature plants, clones, and seeds. Sales and use tax does not apply to a cultivator’s purchase of immature plants, clones, and seeds when the products grown from them will be resold as part of the cultivator’s regular business activities. The seller should obtain and keep a valid and timely resale certificate from the purchaser as support that the sale was for resale. For information on sales for resale and resale certificates, see publication 103, Sales for Resale.
This email is intended to give you an overview of how tax applies to immature plants, seeds, and clones and does not address all requirements for the cannabis industry. For additional information, we encourage you to read our online Tax Guide for Cannabis Businesses, or contact us