You are subject to the same requirements as an independent/third party distributor if you are a cannabis business licensed as a microbusiness that is authorized to engage in distribution, or if you hold multiple cannabis license types to operate as a distributor as well as a cultivator and/or manufacturer. This email explains how and when to report the cultivation tax if you are a distributor that obtains cannabis or cannabis products from a related or affiliated cultivator and/or manufacturer.
Cultivator supplies cannabis to a related/affiliated manufacturer
If you are a microbusiness that cultivates and manufactures cannabis, or a related/affiliated cultivator and manufacturer, you are responsible for calculating the cultivation tax due based on the weight and category of the cannabis that you transfer from the cultivation part of your business to the manufacturing part of your business.
Manufacturer supplies cannabis products to a related/affiliated distributor
As a manufacturer, you are responsible for keeping track of the weight and category of the cannabis used to make a cannabis product. You should provide the weight and category of the cannabis to your related/affiliated distributor.
Distributing cannabis or cannabis products for a related/affiliated cultivator or manufacturer
As a distributor who distributes cannabis or cannabis products for a related/affiliated cultivator or manufacturer, you are responsible for keeping track of the weight and category of the cannabis or cannabis products. If you are also the distributor who arranges for the required testing and you conduct the quality assurance review, then you are responsible for reporting the weight and category of the cannabis or cannabis products entering the commercial market and paying the cultivation tax due to the California Department of Tax and Fee Administration (CDTFA) on the cannabis tax return.
When to report and pay the cultivation tax
- Distributors are required to report and pay the cultivation tax to the CDTFA during the reporting period that the cannabis or cannabis products passes the required testing and quality assurance review and is considered to have entered the commercial market.
- The electronic return and payment of the cultivation tax is due the last day of the month following the reporting period. For example, the filing deadline for the first quarter of 2018 is due by April 30, 2018.
This email is intended to give you an overview of some of the requirements for cannabis businesses that distribute cannabis on their own behalf and does not address all requirements for the cannabis industry. We encourage you to read our online Tax Guide for Cannabis Businesses, or contact us.