Nesteggg Accounting

  • Home
  • Services
    • Nesteggg Accounting
      • Payroll Services
      • Cannabis Accounting
    • Egggsact Tax, Inc.
    • Forms
      • Free Accounting Analysis
      • Business Services Agreement
      • New Corporation/LLC Request
      • New Account Setup
  • Contact Us

Who is a Cannabis Cultivator?

A cannabis cultivator is a person who is in engaged in the business of planting, growing, harvesting, drying, curing, grading or trimming cannabis. A microbusiness licensed to act as a cultivator, must comply with all of the same requirements as a cultivator.

If you are a cannabis cultivator, the CDTFA requires that you:

  • Register with the CDTFA for a seller’s permit.
  • Pay the cultivation tax to your distributor or manufacturer.
  • Electronically file your sales and use tax returns and pay the tax due, if any, to the CDTFA. Even if you do not make taxable sales of cannabis, you are still required to file a return indicating your total sales with your claimed nontaxable or exempt sales during that particular reporting period.

In addition, you must also:

  • Obtain a cultivation license issued by the California Department of Food and Agriculture.
  • Contact your city and/or county government office for information on local licenses you may be required to obtain.

Cannabis Cultivation Tax

Effective January 1, 2018, a tax on cultivation of cannabis (including medicinal cannabis and adult-use cannabis) is imposed on cultivators at a rate of:

  • $9.25 per dry-weight ounce of cannabis flowers, and
  • $2.75 per dry-weight ounce of cannabis leaves.

The cultivation tax applies to all harvested cannabis that enters the commercial market. Cannabis has “entered the commercial market” when the cannabis or cannabis products, except for immature cannabis plants and seeds, have completed and comply with the Medicinal and Adult-Use Cannabis Regulation and Safety Act required quality assurance review and testing.

Distributors are required to collect the cultivation tax from you, as the cultivator, on all harvested cannabis that enters the commercial market based on the appropriate cannabis category. The flower category includes all dried flowers of the cannabis plant, whether trimmed or untrimmed. The leaves category includes all other parts of the cannabis plant other than flowers that are consumed or sold.

However, as a cultivator, if the first transfer or sale of unprocessed cannabis is to a manufacturer, and not a distributor, the manufacturer is required to collect the cultivation tax from you at the time of the first sale or transfer of the unprocessed cannabis. The cultivation tax you pay to a manufacturer will be passed on to a distributor for payment to the CDTFA.

Beginning January 1, 2020, the CDTFA is required to annually adjust the cultivation tax rates to account for inflation. A special notice will be mailed to cannabis businesses informing them of the rates. The cultivation tax rates will also be posted on the Special Taxes and Fees Rate Page

Cannabis Cultivation Tax Imposition

The cannabis cultivation tax is imposed on the cultivator. As a cannabis cultivator, you are responsible for the payment of the cannabis cultivation tax to your distributor or manufacturer. The tax is due on all harvested cannabis that enters the commercial market. No cannabis may be sold unless the cannabis cultivation tax has first been paid.

You should obtain an invoice, receipt, or other similar document from the distributor or manufacturer to which you pay the cultivation tax. The invoice should identify:

  • The licensee receiving the product.
  • Your name and associated unique identifier.
  • The amount of cannabis cultivation tax.

You are liable for the cultivation tax until it has been paid to the state or you are provided such an invoice or receipt from a distributor or manufacturer.

Industry Topics

Cultivation Tax Computation

The cultivation tax is based on the dry-weight ounce of cannabis. To properly calculate the cultivation tax due, it is important that you know the weight in ounces of each category of cannabis that is sold. Partial ounces must be included in the calculation of the cultivation tax due. The example below provides a sample scenario and guidance on how to compute the amount of cultivation tax due.

Measurement of Weight Conversion

Cannabis may be weighed using many different units of measurement. To properly calculate the cultivation tax due, it is important that you know the weight in ounces.

Sales

When you sell cannabis to a customer, such as a distributor, manufacturer, or retailer who provides you with a valid and timely resale certificate, the sale is not subject to sales tax; however it is subject to the cannabis cultivation tax.

Purchases

Generally, most of the products you purchase for use in your business are subject to sales or use tax. However, purchases of certain supplies may not be taxable, whereas purchases of other products may qualify for a partial exemption.

Processors

A processor conducts trimming, drying, curing, grading, or packaging of cannabis and non-manufactured cannabis products. These activities are fabrication labor and are subject to sales tax.

Partial Exemption for Farm Equipment and Machinery

In general, the sale of farm equipment and machinery is subject to sales and use tax. However, certain sales and purchases of farm equipment and machinery are partially exempt from sales and use tax. As a cultivator, you may be able to take advantage of this partial exemption.

Buildings for Raising Plants

Certain buildings may meet the definition of farm equipment for purposes of qualifying for the partial exemption from sales and use tax for farm equipment. The building must be a single-purpose building to house plants, such as a greenhouse.

Solar Power Facilities

If you qualify for the partial exemption from sales and use tax for farm equipment, your purchase of a solar power facility may also qualify.

Exemptions for Diesel Fuel Used in Farming Activities

Most sales and/or purchases of diesel fuel are subject to sales and use tax and diesel fuel tax. However, a partial sales and use tax exemption exists for certain sales and purchases of diesel fuel used in farming activities.

Exemption for Liquefied Petroleum Gas (LPG) Used in Farming Activities

Sales of LPG for agricultural use are not subject to sales and use tax or use fuel tax when purchased by a qualified buyer.

The exemption from sales and use tax applies to the sale or purchase of LPG only if it is used in commercial crop production or harvesting.

Exemption Certificates

When you make a purchase that qualifies for an exemption, you must provide an exemption certificate to your supplier.

Record Keeping

You are required by law to keep business records so that we may verify the accuracy of your sales and use tax and cannabis tax returns and determine how much tax is due, if any.

Recent Posts

  • Economy Opening… Stop… Start…
  • Road Map to Opening
  • Tried Calling?
  • Free Credit Reports
  • CA License Extensions for Cannabis Business
  • What Are Libraries Doing Now
  • Cannabis Markup to Remain the 80%
  • Time to Retire?

Archives

  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018

Categories

  • Cannabis Compliant Accounting + Tax
  • NestEggg's Small Business HELP
  • News
  • Uncategorized

Stay Connected

Nesteggg Facebook

The Nesteggg Group ©2019
All Rights Reserved

Get in Touch

1127 St. Paul Ave
Tacoma WA 98421

1-(888) 987-NEST

accounting@nesteggg.com

Web Design & Maintenance by AquaZebra

constant contact

Copyright © 2023 · Executive Pro Theme on Genesis Framework · WordPress · Log in