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.

New Emergency Regulation For Cannabis Distributors And Retailers Requires California Cannabis Track-and-Trace

CALIFORNIA: The California Department of Tax and Fee Administration (CDTFA) recently adopted emergency Regulation 3702, California Cannabis Track-and-Trace, which requires distributors and retailers to enter the wholesale cost and the retail selling price of cannabis or cannabis products into the California Cannabis Track-and-Trace (CCTT) system. The emergency Regulation 3702 is now in effect.

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The Medicinal and Adult-Use Cannabis Regulations and Safety Act and regulations adopted by the Bureau of Cannabis Control (BCC) require all commercial cannabis activity be recorded in the CCTT system. Distributors and retailers that obtain an annual license with the BCC must begin recording commercial cannabis activity in the CCTT system. In addition to the existing requirements, each licensee must now enter the following information related to the cannabis excise tax.

Cannabis Distributors

A distributor is required to enter into the CCTT system the retailer’s wholesale cost of the cannabis or cannabis products that is sold or transferred to a  retailer in an arm’s length transaction.

In an arm’s length transaction, the distributor is required to calculate the average market price of the cannabis or cannabis products, which is the retailer’s wholesale cost plus a mark-up established by the CDTFA. The wholesale cost used to calculate the average market price is the amount entered into the CCTT system.

Cannabis Retailers

A cannabis retailer is required to enter into the CCTT system:

  • The wholesale cost of the cannabis or cannabis products. The wholesale cost is the amount paid by the retailer for
    the cannabis or cannabis products in an arm’s length transaction and is the amount used to calculate the average
    market price.
  • The retail selling price of the cannabis or cannabis products when the product is sold at retail.