California: Guidance – Micro-business – Multi-License

California: Guidance – Micro-business – Multi-License
California: Guidance – Micro-business – Multi-License
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AUTHOR: JORDAN ZOOT / A Biz In A Box
PUBLISHER:  CANNABIS LAW REPORT

Guidance – Micro-business – Multi-License

Guidance – Micro-business – Multi-License – CDTFA has published a new notice that provides new guidance to the holders of multiple cannabis licenses with respect to the calculation of Cannabis Excise Tax [CET”]. We will have further commentary after we have the opportunity to review the notice carefully. However, we do note that they have not addressed their view of the impact on Cannabis Cooperative Associations [“CCA’s] in the notice. We add that we observed that the item was labeled under a new term “Tax Fact” as distinct from a “Special Notice” and will inquire as to the difference between the two.

 

Guidance – Micro-business – Multi-License

Microbusinesses or Cannabis Businesses with Multiple Licenses:How to Calculate the Cannabis Excise Tax on Nonarm’s Length Transactions

Distributors or microbusinesses authorized to operate as distributors are required to calculate and collect the 15 percent cannabis excise tax from cannabis retailers on the sale or transfer of cannabis or cannabis products (cannabis) based on the average market price of the cannabis. In a non-arm’s length transaction, generally when a cannabis retailer is also the distributor, the average market price of the cannabis is equal to the gross receipts, and the 15 percent cannabis excise tax is applied to the gross receipts of the retail sale of the cannabis.

What is included in gross receipts?

Gross receipts include all charges related to the sale of cannabis, such as labor, services, and certain transportation charges. For example, as a retailer, when you deliver cannabis to your customers using your own vehicles and there is no explicit written agreement prior to the delivery that passes title to the purchaser before delivery, the charge for that delivery is included in the gross receipts subject to the cannabis excise tax. Additionally, if you add a separate amount to your customers’ invoices or receipts to cover a cannabis business tax required by your city, that amount is included in the gross receipts subject to the cannabis excise tax.

Guidance – Micro-business – Multi-License

Example

You are a licensed microbusiness authorized to cultivate, distribute, and make retail sales of cannabis. You sell cannabis flowers to your retail customers for $35.00 per eighth of an ounce and charge $5.00 for delivery. You have an 8.5 percent sales tax rate and a 10 percent business tax. In this nonarm’s length transaction, the average market price is your gross receipts from the retail sale of the cannabis flowers.

Excise tax calculation:

Selling price of cannabis $35.00
Cannabis business tax $3.50
Delivery $5.00
Subtotal ($35.00 + $3.50 + $5.00) $43.50
Excise tax ($43.50 x 15%) $6.53

Sales tax calculation:

Subtotal ($43.50 + $6.53) $50.03
Sales tax ($50.03 x 8.5%) $4.25
Total due ($50.03 + $4.25) $54.28

The distribution part of your business is responsible for reporting and paying the cannabis excise tax of $6.53 ($43.50 × 15%) to the CDTFA on your cannabis tax return along with the cultivation tax that is due on the cannabis flowers that entered the commercial market. The cannabis retail part of your business is responsible for reporting and paying the sales tax of $4.25 ($50.03 x 8.5%) to the CDTFA on your sales and use tax return.

This email is intended to give you an overview of how the cannabis excise tax is calculated in a non-arm’s length transaction and does not address all requirements for the cannabis industry.Guidance – Micro-business – Multi-License

The quoted item above is the notice from CDTFA under Tax Facts

Guidance – Micro-business – Multi-License

 

Cannabis Law Journal – Editorial Board Members

Editor – Sean Hocking

Author Bios

Canada
Matt Maurer – Minden Gross
Jeff Hergot – Wildboer Dellelce LLP

Costa Rica
Tim Morales – The Cannabis Industry Association Costa Rica

Nicaragua
Elvin Rodríguez Fabilena

USA

General
Julie Godard
Carl L Rowley -Thompson Coburn LLP

Arizona
Jerry Chesler – Chesler Consulting

California
Ian Stewart – Wilson Elser Moskowitz Edelman & Dicker LLP
Otis Felder – Wilson Elser Moskowitz Edelman & Dicker LLP
Lance Rogers – Greenspoon Marder – San Diego
Jessica McElfresh -McElfresh Law – San Diego
Tracy Gallegos – Partner – Fox Rothschild

Colorado
Adam Detsky – Knight Nicastro
Dave Rodman – Dave Rodman Law Group
Peter Fendel – CMR Real Estate Network
Nate Reed – CMR Real Estate Network

Florida
Matthew Ginder – Greenspoon Marder
David C. Kotler – Cohen Kotler

Illinois
William Bogot – Fox Rothschild

Massachusetts
Valerio Romano, Attorney – VGR Law Firm, PC

Nevada
Neal Gidvani – Snr Assoc: Greenspoon Marder
Phillip Silvestri – Snr Assoc: Greenspoon Marder

Tracy Gallegos – Associate Fox Rothschild

New Jersey

Matthew G. Miller – MG Miller Intellectual Property Law LLC
Daniel T. McKillop – Scarinci Hollenbeck, LLC

New York
Gregory J. Ryan, Esq. Tesser, Ryan & Rochman, LLP
Tim Nolen Tesser, Ryan & Rochman, LLP
Cadwalader, Wickersham & Taft LLP

Oregon
Paul Loney & Kristie Cromwell – Loney Law Group
William Stewart – Half Baked Labs

Pennsylvania
Andrew B. Sacks – Managing Partner Sacks Weston Diamond
William Roark – Principal Hamburg, Rubin, Mullin, Maxwell & Lupin
Joshua Horn – Partner Fox Rothschild

Washington DC
Teddy Eynon – Partner Fox Rothschild