Information for Manufacturers of Cannabis Products
How to Collect the Cultivation Tax and Pay it to Distributors or Other Manufacturers
As a manufacturer of cannabis products, when you receive unprocessed cannabis from a cultivator, you are required to collect the cultivation tax from the cultivator based on the weight and category of the cannabis. You must provide a receipt to the cultivator that shows the following:
- Your name (licensee receiving the cannabis)
- Name of cultivator, including the unique identifier number of the cannabis
- The amount of the cultivation tax (including weight and category of cannabis)
- The date of sale or transfer
When you sell or transfer the cannabis product you manufactured to a licensed distributor, you must pay the cultivation tax collected on the unprocessed cannabis used to make the cannabis products to the distributor. The distributor is responsible for arranging testing and quality assurance prior to the sale or transfer of the cannabis product to a retailer. The distributor is also responsible for reporting and paying the cultivation tax to the CDTFA.
However, you may manufacture cannabis products that you sell or transfer to one or more manufacturers instead of directly to the distributor. In these instances, you pass the cultivation tax that you collected from the cultivator on the cannabis you used to manufacture the cannabis product to the next manufacturer(s).
To illustrate how the cultivation tax you collected from the cultivator follows the cannabis product to another manufacturer and finally to the distributor, assume you purchased 90 pounds of cannabis leaves from a cultivator. The cultivation tax is calculated as follows:
90 lbs. x 16 ounces per lb. = 1,440 ounce of leaves
Cultivation tax rate on leaves is $2.75 per ounce
Cultivation tax due (1,440 x $2.75) = $3,960
You collect $3,960 in cultivation tax from the cultivator and provide the cultivator a receipt. You then manufacture cannabis oil from the 90 pounds of cannabis and sell one third of the cannabis oil to three different manufacturers.
When you sell the cannabis oil, you will pass on to each of the three manufacturers $1,320 ($3,960/3) of the cultivation tax you collected. You pass the cultivation tax and the cannabis information (that is, the weight, category, and unique cannabis identifier number) to the next manufacturer(s), or other party.
You, and each party to the transaction, from the original sale from the cultivator to the final transfer or sale to the distributor, are required to provide a receipt, invoice, manifest, or some form of documentation to the next party in the transaction showing the cultivation tax and the weight and category of the cannabis being passed on from cultivation to when the cannabis enters the commercial market.