Running a cannabis business, just like any other business, means paying taxes. Depending on what kind of business it is, there are different tax laws to comply with. The California Department of Tax and Fee Administration (CDTFA) requires cannabis businesses that sell cannabis or cannabis products to obtain a seller’s permit or a cannabis tax permit and to file
cannabis tax returns regularly. This is in addition to obtaining a cannabis license from one of the three licensing authorities in California.
As of last year, there is a 15 percent excise tax based on the average market price on cannabis and cannabis products. There is also a tax imposed on cannabis cultivators before it enters the commercial market, which the CDTFA will regulate annually starting in 2020 to account for inflation.
Cultivators, manufacturers, and retailers must obtain a seller’s permit from the CDTFA. Distributors must obtain a cannabis tax permit as well as a seller’s permit if they’re selling any physical cannabis products. The distributor must then charge a cultivation tax to cannabis cultivators and manufacturers and an excise tax to retailers they supply. They’re required to file the tax information electronically to the CDTFA. Similarly, retailers charge consumers a sales tax and must file it with the CDTFA as well. Licensees are required to keep records of cannabis sales and distribution for at least four years.
Understanding cannabis law can be complex and confusing. It is a newly emerging industry in California and maneuvering through the licensing and compliance process alone is not an easy task. Our team of experienced consultants are skilled in cannabis law, real estate acquisition, and business consulting. More information on cannabis tax laws can be found on the CDTFA website .