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.