Search Results for: excise tax

US Bank Splits With WSLCB; Will No Longer Accept Washington Marijuana Excise Tax Payments

WASHINGTON:  As of October 1, 2016 the Washington State Liquor and Cannabis Board (WSLCB) will be switching financial institutions for marijuana excise tax payments which will have an impact on those licensees using EPay. After the switch the current vendor will no longer be supporting the site, those licensees who have a login with the current vendor (US Bank) are highly encouraged to download any historical payment information needed for record keeping purposes prior to the change to prevent data loss. Licensees will still be able to pay using the traceability system link however some of the functionality on the financial institution side may be different with a new vendor.

What do I need to do?
Those licensees that have historical data with the old vendor are encouraged to download it before the change to prevent data loss. Licensees who do not have historical data or have already downloaded it do not need to do anything. The “Pay Now” function in the free traceability program remains the same.

Why are you switching financial institutions?
The Board’s current vendor, US Bank, has indicated that they no longer intend to accept marijuana excise tax payments.

Why can’t I get my historical data?
Until the change historical data will still be available through the current vendor, after the change the old portal will no longer be supported. Licensees are encouraged to download their historical data prior to the change.

What you need to know about the new portal:

  • The “Pay Now” function in the free traceability program is the same and will continue to be processed through a secure website.
  • Routing and bank account information will be required each time a payment is requested (it will not store this information).
  • Payments are made the same day as posted (cannot be scheduled for a future date).
  • Payments for more than the excise tax obligation amount will be accepted.
  • All transactions will be posted as Pacific Standard Time.
  • The “Pay Now” system is available 24 hours a day except for routine or emergency maintenance. 
  • System notices will be posted when the pay now system is not available and when to try again.
  • Historical payment information will not be available in the new system.

Questions?

Questions regarding the change can be sent to marijuanataxes@lcb.wa.govor you can call the Marijuana Tax line (306) 664-1789.

 

IRS Position On 502 Excise Taxes – “Don’t Count Excise Tax Amount As Income”

WASHINGTON: Dean Guske, CPA to many marijuana businesses in Washington State (and around the country),  and his firm, Guske & Company, have been taking the position with their clients since the beginning of the year that the 502 excise taxes DO NOT have to be counted as income when 502 Cannabis businesses file their federal income taxes.  Instead, the excise tax is a reduction from the net income.

This is in direct contradiction to what most people in the industry have thought was the position of the IRS – that the full amount taken in from sales would be counted as income before the excise taxes were paid to the Washington State Department of Revenue, and therefore would double tax the businesses by having to pay tax on income they didn’t get to keep.

But a new memo issued by the IRS today confirms Guske’s position, concluding that: “A taxpayer who paid the State of Washington marijuana excise tax should treat the expenditure as a reduction in the amount realized on the sale of the property.”

You can read the full memo here.

Washington CPA: Update on 25% Marijuana Excise Tax

By Dean G. Guske, CPA

Over the last several weeks, there has been quite a bit of discussion about how to apply the 25% excise tax to your sales. I have read a few emails that have been forwarded to me for interpretation and have had some conversations with clients about what to do. I’m writing this to all of you in Washington’s legal marijuana industry as a courtesy and to clarify the issue from my perspective and give you my opinion of how the tax should be calculated.  This primarily applies to producers and processors, however there are some implications to retailers, and I have some comments on some strategies being considered by them.

At this point, the LCB is still working to get all of their interpretations out to license holders.

RCW 69.5 0.535 reads in relevant part as follows:

1.    There is levied and collected a marijuana excise tax equal to 25% of the selling price on each wholesale sale in this state of marijuana by a licensed marijuana producer to a licensed marijuana processor or another licensed marijuana producer. This tax is the obligation of the licensed marijuana producer.

2.    There is levied and collected a marijuana excise tax equal to 25% of the selling price on each wholesale sale in this state of marijuana concentrates, usable marijuana, and marijuana infused products by a licensed marijuana processor to a licensed marijuana retailer. This tax is the obligation of the licensed marijuana processor.

3.    There is levied and collected a marijuana excise tax equal to 25% of the selling price on each retail sale in the state of marijuana concentrates, usable marijuana, and marijuana infused products. This tax is the obligation of licensed marijuana retailer is separate and in addition to general state and local sales and use taxes that apply to retail sales of tangible personal property, and is part of the total retail price to which general state and local sales and use taxes apply.

 This is all simple and straightforward on the face of it. However, all of you are very clever entrepreneurs and you want to arrange your business transactions in a way that minimizes the impact of this tax on your business.  I obviously agree.

According to Rick Fortin, Marijuana Tax Unit Supervisor at the LCB, packaging is required by law and needs to be included in the price of the product which would therefore be subject to the 25% excise tax. In other words, the LCB will not allow you to separately state your packaging and avoid paying excise tax on any amount that you separately state on your invoice. In my opinion, this is a logical interpretation.  I know this won’t make you happy, but unless you want to litigate the point, I wouldn’t recommend stating this separately on your invoices to reduce your excise taxes.  As for delivery, transportation and other service fees, it is my understanding that the LCB is still formulating their interpretation and position. It’s also my understanding that they are consulting with the Department of Revenue (DOR) and the Atty. Gen.’s office in order to clarify what should be included in the selling price subject to the excise tax.

I think the fact that the LCB is consulting with the Department of Revenue on these issues means that it may not bode well for separating service and delivery charges with respect to the LCB excise tax. I say this only because when computing sales tax, shipments that consist of taxable tangible personal property and delivery charges, those delivery charges are included in the sales price and are therefore subject to sales tax. I’m not sure where the LCB will come down on this, but my guess is that they may try to follow the DOR rule on sales taxes. Monkey see, monkey do.

Okay, where do we go from here? The LCB has made their position clear with respect to packaging costs. Therefore, I do not recommend separately stating those costs on your invoice with an expectation of avoiding excise tax for the packaging portion of your sale. With respect to service and delivery charges, my recommendation is as follows. If you are going to separately state service and delivery charges prior to the LCB’s official ruling don’t be overly aggressive until we get some additional clarification from them. I don’t want you to put yourself in a position where you will be required to amend returns, pay substantial amounts of additional tax and potentially some penalties. I know this is frustrating but the downside could be more so.

I have also had some discussions with a few retailers recently asking if they can avoid some excise tax by a selling ”kits”. For instance, selling a gram of cannabis at a minimal amount over the wholesale price if they also purchase a pack of rolling papers that have been generously marked up. (Again, the entrepreneur’s mind at work!) A strict reading of the excise tax law seems to allow this strategy. However, if we take a look at the RCW that addresses “bundled transactions” for sales tax purposes, there may be some pushback from the LCB on this kind of strategy. Again, my recommendation is to not get overly aggressive with this strategy.

As always, if you want to discuss this in more detail and how it applies directly to your business please give me a call or shoot me an email at dean@deanguske.com

First Three Days Of Marijuana Sales Pull In More Than $148,000 In Excise Taxes

WASHINGTON:  With just a handful of stores opened and supply short, the state will still pull in $148,256 of excise taxes from sales on Tuesday, Wednesday and Thursday, according to figures provided by the Liquor Control Board. That numbers reflect sales throughout the supply chain, including those from suppliers to retailers but don’t account for sales tax or business and occupation (B&O) taxes.

“I think it’s a good start for the number of stores we have open,” said Randy Simmons, the state’s marijuana project director. 

Simmons said he expects volatile revenue figures until the end of September or beginning of October when outdoor grows are expected to be harvested.

Marijuana is taxed at 25 percent as it passes through each rung of  the industry’s supply chain (producer, processor and retailer). Most excise taxes from pot is earmarked toward prevention, research and health funding.

 

U.S. Federal Cannabis Legalization Could Be Worth $128.8 Billion In Taxes And 1.6 Million Jobs

DISTRICT OF COLUMBIA: New Frontier Data, the authority in data, analytics and business intelligence for the global cannabis industry, releases its new study Cannabis In the U.S. Economy: Jobs, Growth and Tax Revenue, 2019 Edition. The report looks at the current state of legal cannabis jobs and tax revenues and projects the impact that full federal legalization would have on the U.S. economy, especially tax revenue generation and job creation. New Frontier Data forecasts that under full federal legalization the cannabis industry could produce nearly $130 billion in additional tax revenues and over 1 million jobs nationwide.

“With so much speculation about economic slowdown, the potential for federally legal cannabis to create up to a million new jobs and close to $130 billion in tax revenue is likely going to be of interest to regulators and presidential candidates in 2020,” said New Frontier Data Founder and CEO Giadha Aguirre de Carcer. “Cannabis is already being considered as an investment option for forward-looking portfolio and fund managers as a possible hedge against economic downturn impacting more traditional investments.”

Some of the report findings include that:

  • 2018-2019 YOY job growth in the cannabis industry generated nearly 82,000 jobs.
  • If full legalization occurred in all 50 states today, there would be in excess of 1.46 million jobs, increasing to 1.63 million jobs by 2025.
  • Full legalization would result in more legal businesses participating in the market, more consumers participating in the legal market, and more employees on official payrolls, resulting in $8.4 billion in payroll taxes. By 2025, payroll deductions would increase to $9.5 billion.
  • Assuming a 15% federal sales tax, total revenues from 2018–2025 would reach $73.7 billion. This amount would be entirely new revenue to the U.S. Treasury, as there are currently no federal sales or excise taxes.
  • The total combined taxes under full federal legalization would reach $175.8 billion between 2018–2025 based on business tax revenues, the payroll withholdings based on the estimated employment, and the 15% retail sales taxes.
  • The difference between the current structure and the theoretical model is a $128.8 billion increase in federal tax revenues.

A free Download of Cannabis In the U.S. Economy: Jobs, Growth and Tax Revenue, 2019 Edition is available at: https://newfrontierdata.com/jobs2019

California Department Of Tax And Fee Administration Reports Cannabis Tax Revenues For Fourth Quarter Of 2018

CALIFORNIA:  The California Department of Tax and Fee Administration (CDTFA) reported revenue numbers today for cannabis sales for the 4th quarter of 2018. Tax revenue reported by the cannabis industry totaled $103.3 million for 4th quarter returns due by January 31, 2019, which includes state cultivation, excise, and sales taxes. It does not include tax revenue collected by each jurisdiction.

As of February 14, 2019, California’s cannabis excise tax generated $50.8 million in revenue reported on 4th quarter returns due by January 31, 2019. The cultivation tax generated $16.4 million and the sales tax generated $36.1 million in reported revenue. Retail sales of medicinal cannabis and medicinal cannabis products are exempt from sales and use taxes if the purchaser provides a valid Medical Marijuana Identification card and valid government-issued identification card.

Previously reported revenue for 3rd quarter returns was revised to $100.8 million, which included $53.3 million in excise tax, $12.6 million in cultivation tax, and $34.9 million in sales tax.

Revisions to quarterly data are the result of amended and late returns, and other tax return adjustments.

In November 2016, California voters approved Proposition 64, the Control, Regulate, and Tax Adult Use of Marijuana Act. Beginning on January 1, 2018, two new cannabis taxes went into effect: a cultivation tax on all harvested cannabis that enters the commercial market and a 15 percent excise tax upon purchasers of cannabis and cannabis products. In addition, retail sales of cannabis and cannabis products are subject to state and local sales tax.

To learn more, visit the Tax Guide for Cannabis Businesses on the CDTFA website.

Report: Retail Cannabis Tax Revenues Surpass $1 Billion In 2018

DISTRICT OF COLUMBIA: State and local excise tax collections on retail adult-use cannabis sales surpassed $1 billion in 2018 — a 57 percent increase over 2017 levels, according to data compiled by the Institute on Taxation and Economic Policy.

Annual excise tax revenues on adult-use cannabis sales ($1.04 billion) rivaled those for all forms of alcohol $(1.16 billion), the group reported. State-specific sales taxes on retail cannabis purchases also yielded an addition $300 million in revenue in 2018.

Authors of the report estimated that cannabis-specific taxes would raise an estimated $11.9 billion annually if the product were legally available at retailers nationwide.


For more information, contact Justin Strekal, NORML Political Director, at: (202) 483-5500. Full text of the report is available online.

Giambra Says Marijuana Tax Revenues Could Deliver $500 Million A Year

New Revenue Stream Could Help Rebuild State, Says Gubernatorial Candidate

NEW YORK:  “Conservative projections of an estimated $500 million a year in initial marijuana tax revenues for New York State could leverage enormous economic impact across the board and help rebuild our state,” says former Erie County Executive Joel Giambra, an independent candidate for governor who believes the time has come to legalize the sale of marijuana.

“Nine other states have taken this step and medical marijuana is legal in 29 states,” says Giambra, who is seeking the Reform Party line for governor.  “Other states are poised to take action and according to Arcview Market Research, one of the top market research firms for the cannabis industry, legal marijuana sales were expected to hit $9.7 billion in North America in 2017 (final numbers not available yet).  We need to take marijuana off the black market and cultivate an entrepreneurial economy in New York State instead of crushing our citizens with more onerous taxes to feed the Albany political pipeline.”

Giambra said that based on research he has commissioned that he is releasing today, an excise tax of 13 percent in addition to the existing state and local sales taxes on legal adult marijuana would generate $500 million a year and could finance state bonding of $12.2 billion over five years.

“The money generated from legalizing marijuana would go a long way toward dealing with our state’s crumbling roads and bridges and help with the equally daunting challenge of fixing the broken New York City metropolitan transit system,” said Giambra.  “Legalizing the adult use of marijuana is a cornerstone of my campaign for governor.  I pledge that if I win election, it will be one of my major priorities because of the immediate economic benefits it can produce.”

Giambra said according to his analysis, every $1 billion spent on infrastructure will create 13,000 jobs directly in construction and among suppliers and thousands more indirectly, leading to more than 244,000 new jobs over seven years.

“This is a plan to rebuild New York without continuing to raise taxes,” said Giambra.  “There’s another billion dollars in taxes and fees already projected in the Albany pipeline this year to deal with a deficit estimated of at least $4.4 billion.  I think the citizens have had enough.  Let’s take marijuana off the black market, like other states have, and begin to phase in that new revenue stream and put that money to work for the people of New York.”

Legalization of marijuana also has strong public support as a 2017 Gallup Poll showed that 64 percent of Americans favor legalization, with a majority of Republicans backing it for the first time.

Upon the enactment of the cannabis regulation, Governor Giambra will ensure – if need be, by the power of the pardon – that all non-violent marijuana convictions are expunged and all individuals currently incarcerated for non-violent marijuana crimes are released as immediately as is practicable. Minorities in New York continue to face marijuana arrests nearly 10 times the rate of whites.

 

 

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Why Colorado Has A Tax-Free Holiday For Marijuana

COLORADO:  An accounting error in Colorado is paying off for marijuana consumers Wednesday, when a quirk in a state tax law prompts the state to suspend most taxes on recreational pot.

The one-day pot tax holiday means Colorado won’t collect 10 percent sales taxes on pot. The state is also suspending a 15 percent excise tax on marijuana growers.

The tax break is happening because Colorado underestimated overall state tax collections last year. Under the state constitution, the accounting error triggers an automatic suspension of any new taxes — in this case, the recreational marijuana taxes voters approved in 2013.

Pioneer Pot States Have Collected More Than $200 Million In Marijuana Taxes

WASHINGTON AND COLORADO: The first two states to legalize recreational marijuana have collectively raked in at least $200 million in marijuana tax revenue, according to the latest tax data — and they’re putting those dollars to good use.

In Colorado, after about a year and a half of legal recreational marijuana sales, the state has collected more than $117 million in excise taxes from both the recreational and medical marijuana markets, according to the most recent data from the Colorado Department of Revenue.

Washington state got a slower start. Its retail shops didn’t begin selling recreational marijuana until July of last year, but they are keeping pace with Colorado’s. About $83 million in excise taxes have already been collected in the year since sales first began, according to the most recent tax data from the Washington State Liquor and Cannabis Board.