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 Distributor?

A cannabis distributor is a person who procures, sells, and/or transports cannabis between licensed cannabis businesses, such as a cultivator, manufacturer, or retailer. A microbusiness licensed to act as a distributor must comply with all the same requirements as a distributor.
If you are a cannabis distributor, the CDTFA requires that you:

  • Register with the CDTFA for a seller’s permit, if you make sales of cannabis, cannabis products, or tangible personal property in California.
  • Register with the CDTFA for a cannabis tax permit (this is separate from your seller’s permit).
  • Collect the cannabis cultivation tax from cultivators and manufacturers from which you receive cannabis and/or cannabis products.
  • Collect the cannabis excise tax from cannabis retailers you supply (sell and/or transport) with cannabis and/or cannabis products.
  • Provide an invoice or receipt to the businesses from which you collect the cultivation tax and the cannabis excise tax.
  • Electronically file both your sales and use tax and cannabis tax returns and pay the amounts due to the CDTFA.

In addition, you must also:

  • Obtain a distributor license issued by the Bureau of Cannabis Control within the California Department of Consumer Affairs.
  • Contact your city and/or county government office for information on local licenses you may be required to obtain.

Cannabis Excise Tax and Cultivation Tax

Effective January 1, 2018, two new cannabis taxes apply as follows:

  • A tax on cultivation of 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.
  • A 15 percent excise tax is imposed upon all purchasers of cannabis and cannabis products, including medicinal cannabis and adult-use cannabis.

The cultivation tax applies to all harvested cannabis that enters the commercial market. Cannabis has “entered the commercial market” when the cannabis or cannabis product, 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.

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 be posted on the Special Taxes and Fees Rate Page.

The cannabis excise tax is based on the “average market price.” Please refer to the heading, Average Market Price, below for more information.

Industry Topics

Cannabis Cultivation Tax Collection

As a cannabis distributor, you are responsible for collecting the cannabis cultivation tax from cultivators and manufacturers from whom you receive cannabis and/or cannabis products.

Cultivation Tax Computation

The cultivation tax is based on the dry-weight ounce of cannabis that enters the commercial market. 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. 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.

Average Market Price

Effective January 1, 2018, a 15 percent cannabis excise tax applies to the average market price of the retail sale. The average market price is determined by the type of transaction (either “arm’s length” or “nonarm’s length”) that occurred when the seller (cultivator, manufacturer or distributor) sold the product to the retailer.

Cannabis Excise Tax Collection

As a cannabis distributor, you are responsible for collecting the cannabis excise tax from the cannabis retailers that you supply (sell and/or transport) with cannabis and/or cannabis products.

Excise Tax Computation

The cannabis excise tax is 15 percent of the average market price of the retail sale. To properly calculate the cannabis excise tax due, it is important to know whether the retailer’s purchase of the cannabis and/or cannabis product was at arm’s length or not. For more information, see the heading Average Market Price above. The examples below provide sample scenarios and guidance on how to compute the amount of cannabis excise tax due.

Cannabis Cultivation Tax Collection

As a cannabis distributor, you are responsible for collecting the cannabis cultivation tax from cultivators and manufacturers from whom you receive cannabis and/or cannabis products.

Sales Tax Collection

As a cannabis distributor, you are responsible for transporting cannabis and cannabis products between licensed cannabis businesses. Even if all your sales or transports of cannabis and cannabis products are not subject to sales tax, you are still required to file a return and report your activities to the CDTFA.

Purchases

When you purchase a product that will be resold, you can purchase it without paying sales or use tax by providing the seller a valid and timely resale certificate. Sales tax will apply if you sell the product at retail. However, when you purchase a product for resale without paying sales tax but, instead of selling it, you consume or use the product, then you owe use tax based on the purchase price.

Record Keeping

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

Refunds

If you have collected and remitted more cannabis tax than the amount due, you may be able to get a refund of the overpayment.

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 © 2021 · Executive Pro Theme on Genesis Framework · WordPress · Log in