15% Excise Tax under the “Medicinal and Adult-Use Cannabis Regulation and Safety Act” starting January 1, 2018.
Revenue and Taxation Code § 34011 provides that effective January 1, 2018, a statewide cannabis excise tax will be imposed upon all purchasers of cannabis or cannabis products sold in the State of California at the rate of 15 percent of the average market price of any retail sale by a cannabis retailer.
Excise taxes are taxes paid when purchases are made on a specific good, in this case cannabis and cannabis products. The 15% excise tax is in addition to the sales and use tax imposed by the state and any tax imposed by the local governments.
“Average market price” shall mean in an arm’s length transaction, the average market price means the average retail price determined by the wholesale cost of the cannabis or cannabis products sold or transferred to a cannabis retailer, plus a mark-up, as determined by the Department of Tax and Fee Administration on a biannual basis in six-month intervals.
An “Arm’s length transaction” means a sale entered into in good faith and for valuable consideration that reflects the fair market value in the open market between two informed and willing parties, neither under any compulsion to participate in the transaction. In a nonarm’s length transaction, the average market price means the cannabis retailer’s gross receipts from the retail sale of the cannabis or cannabis products.
The Distributor in an arm’s length transaction shall collect the cannabis excise tax from the cannabis retailer on or before 90 days after the sale or transfer of cannabis or cannabis product to the cannabis retailer.
A Distributor in a nonarm’s length transaction shall collect the cannabis excise tax from the cannabis retailer on or before 90 days after the sale or transfer of cannabis or cannabis product to the cannabis retailer, or at the time of retail sale by the cannabis retailer, whichever is earlier.
A cannabis retailer shall be responsible for collecting the cannabis excise tax from the purchaser and remitting the cannabis. Each cannabis retailer shall provide a purchaser with an invoice, receipt, or other document that displays the cannabis excise tax separately from the list price, the price advertised in the premises, the marked price, or other price and includes a statement that reads: “The cannabis cultivation and excise taxes are included in the total amount of this invoice.”
A Distributor shall report and remit the cannabis excise tax to the Department of Tax and Fee Administration on a quarterly basis on or before the last day of the month following each quarterly period of three months.
Sales and Use Taxes do not apply to retail sales of medicinal cannabis, medicinal cannabis concentrate, edible medicinal cannabis products, or topical cannabis when a qualified patient or primary caregiver for a qualified patient provides his or her County issued Medical Marijuana Patient Identification Card issued pursuant to Health and Safety Code Section 11362.71 along with a valid government-issued identification card. This tax exception for county medical marijuana idenfication card holders does not apply to the Excise Tax.