Marijuana Laws: They’re Real and They’re Here
All of 58 California counties are currently updating and establishing local policies on Cannabis retailing, manufacturing, and cultivating laws frequently as well as tax laws. Now that California is implementing new Medical Marijuana laws and viability of Recreational Cannabis, it is recommended to be aware of how these new changes affect in you when licensing is scheduled to be granted in January 2018.
State licensing for commercial-sized medical farms is allowable under the new law. Entities that are existing currently can operate with local approval until January 1, 2018. Businesses selling without a license can face the civil penalties of up to 3 times the amount of the license fee for each violation. Some highlights of Californias regulations include:
Types of Business Licenses: (1) cultivation facilities, (2) manufacturers, (3) testing facilities, (4) retailers, (5) distributors, and (6) microbusinesses.
License Restrictions: In order to receive a license and become a cultivation business you must be at least 21 years of age with continuous California residency since at least January 1, 2015.
The Bureau of Cannabis Control (BBC) is the lead agency in developing regulations for medical and adult-use cannabis in California. They are responsible for licensing retailers, distributors, testing labs and microbusinesses.
Manufactured Cannabis Safety Branch is a division of the California Department of Public Health, who are responsible for regulating the manufacturers of cannabis-infused edibles for both medical and nonmedical use.
CalCannabis Cultivation Licensing, a division of the California Department of Food and Agriculture, CDFA, is developing regulations to license cultivators of recreational medicinal and adult-use cannabis. Implementing a track-and-trace system to record the movement of cannabis through the distribution chain.
A temporary license can help your business engage in commercial cannabis activities for a period of 120 days. BBC can issue a temporary license when you have a valid license, permit, or other authorization issued by the local jurisdiction.
Qualified patients are exempt from the state permit program if cultivating less than 100 square feet for personal medical use. Caregivers with 5 or fewer patients are allowed up to 500 square feet.
Tax Guide for Cannabis Businesses
When it comes to selling cannabis or cannabis products, your business must be registered with the California Department of Tax and Fee Administration for a sellers permit. Beginning on January 1, 2018, there will be two new taxes that apply as follow:
- A 15% excise tax is imposed upon purchase of cannabis and cannabis products, Retailers of cannabis and cannabis products are required to collect 15% excise tax from the purchaser based on the average market price of any retail sale and must pay it to their cannabis distributor.
- A cultivation tax is imposed upon cannabis cultivators on all harvested cannabis that enters the commercial market. Cannabis cultivators must pay the cultivation tax to either their distributor or their manufacturer. The rate of cultivation tax is:
- $9.25 per dry-weight ounce of cannabis flowers that enter the commercial market
- $2.75 per dry-weight ounce of cannabis leaves that enter the commercial market
All cannabis business marketing sales are required to:
- Register online with CDTFA for a seller’s permit
- File sales and use tax returns electronically and pay any sales and use tax to the CDTFA. Even though some of your business sales are subject to sale tax, you must still file a return and report your activities on your return to the CDTFA.
If you are a cannabis distributor, these are the requirements that apply to you:
- Register online on January 1, 2018, with CDTFA for a cannabis tax permit. (Available November 2017)
- Beginning January 1, 2018, must collect the excise tax from retailers you supply.
- Collect cultivation tax from cultivators or manufacturers that send or transfer cannabis and cannabis products to you beginning January 1, 2018.
- Must file for both your cannabis tax and sale and use tax returns electronically and pay tax amounts due to the CDTFA
Let Us Help You
Helping your business succeed is very important for CDTFA and Bridge Law To help you have a better understanding these obligations specific to your cannabis business, we have created this guide detailing about new tax law issues and important information that is relevant to your business. For more general information, please call our office.
The attorneys at Bridge Law LLP will meet with you and help you determine how best to set up your company based on your business goals.
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*The information presented in this article does not constitute legal advice and is not intended to create an attorney-client relationship. The information presented in this article is not tax advice and you should consult a CPA or other qualified accounting and tax professional to discuss your specific circumstances.