A microbusiness licensed as a retailer must comply with all the same requirements as a retailer.
If you are a cannabis retailer, the CDTFA requires that you:
- Register with the CDTFA for a seller’s permit.
- Charge and collect sales tax on your taxable retail sales of cannabis and/or cannabis products, and other products.
- Electronically file your sales and use tax returns and pay the sales and/or use tax to the CDTFA.
- Charge and collect the cannabis excise tax from your customers who purchase cannabis and/or cannabis products.
- Pay the cannabis excise tax that is due to your distributor. DO NOT remit cannabis excise tax on your sales and use tax return.
- Provide your customer with an invoice, receipt, or other document which includes the statement “The cannabis excise taxes are included in the total amount of this invoice.” (Your customers are liable for the cannabis excise tax until it has been paid to the state or you provide them with such an invoice or receipt.)
In addition, you must also:
- Obtain a cannabis retail license issued by the Bureau of Cannabis Control within the 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
Effective January 1, 2018, a 15 percent excise tax is imposed upon retail purchasers of all cannabis and cannabis products, including medicinal cannabis. The 15 percent excise tax is calculated based on the average market price from the retail sale. Please refer to the heading, Average Market Price, below for more information. As a retailer, you are required to pay the cannabis excise tax to your distributor and collect the cannabis excise tax from your customers. No cannabis and/or cannabis products may be sold unless the cannabis excise tax is paid by the purchasers (consumers) at the time of sale.
Your sales of cannabis and cannabis products are generally subject to sales tax, unless your customer provides you with a valid Medical Marijuana Identification Card indicating they are a qualified patient or the primary caregiver for a qualified patient, along with a valid government-issued identification card. Please refer to the heading, Proposition 64 Exempts Certain Medicinal Cannabis Sales from Sales and Use Tax, below for more information.
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 “nonarms’ length”) that occurred when the seller (cultivator, manufacturer or distributor) sold the product to you.
Cannabis Excise Tax and Sales Tax Computation
The cannabis excise tax is 15 percent of the average market price of the retail sale and the sales tax is based on your gross receipts. The examples below provide sample scenarios and guidance on how the cannabis excise tax and sales tax due are computed.
Local Government Cannabis Business Taxes
Some cities have enacted measures requiring that cannabis businesses located in their jurisdictions pay a cannabis business tax. If you add a separate amount to your customers’ invoices or receipts to cover your cannabis business tax, sales tax applies to the business tax amount.
Distributors use a mark-up rate to compute the average market price of cannabis and cannabis products sold or transferred in an arm’s length transaction. The mark-up rate is not intended to be used to determine the amount for which you sell your cannabis and cannabis products. You may use any mark-up you would like to establish your selling price.
Proposition 64 Exempts Certain Medicinal Cannabis Sales from Sales and Use Tax
Effective November 9, 2016, certain sales of medicinal cannabis are exempt from sales and use tax.
You are responsible for obtaining a seller’s permit and reporting and paying the sales tax on the retail selling price of consignment sales.
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 when 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 the use tax based upon the amount of the purchase price.
You are required by law to keep business records so that we may verify the accuracy of your sales and use tax return and determine how much tax is due, when a return has not been filed.