On January 1, 2023, changes are coming to the cannabis excise tax in California. The responsibility for collection and payment of tax to the California Department of Tax and Fee Administration (CDTFA) will transfer from distributors to cannabis retailers. These changes will significantly impact cannabis businesses operating in California.
Changes for Cannabis Distributors:
Distributors will no longer be responsible for collecting the 15% cannabis excise tax from cannabis retailers. Additionally, they will not be required to hold a cannabis tax account with CDTFA and accounts will automatically be closed out. Distributors will file their last cannabis tax return for December 2022 by January 31, 2023.
Cannabis Retailers and Excise Tax Impacts:
Starting January 1, 2023, cannabis retailers will need to obtain a cannabis retailer excise tax permit from CDTFA. As a result, retailers will be responsible for collecting the 15% tax from their customers. Gross receipts from the sale of cannabis or cannabis products will be used to determine the amount owed. Retailers will file their cannabis retailer excise tax returns online with CDTFA and pay the tax due. They will also be able to claim a credit for any excise tax paid to a distributor for cannabis or cannabis products bought before January 1, 2023 and sold after.
The Department of Cannabis Control has already approved some retailers for a license fee waiver. These retailers can apply to CDTFA to receive Vendor Compensation, which equals 20% of the cannabis tax due.
New Excise Tax Enforcement Provisions:
The CDTFA will enforce provisions of the new law to ensure compliance. Unlicensed businesses or individuals possessing, selling, or storing cannabis or products for sale will be held liable for cannabis taxes owed to CDTFA. Additionally, the CDTFA may hold any person personally accountable for any unpaid taxes, interest, and penalties. Licensed persons who sell or transfer cannabis or products but fail to report accurately will also face liability for taxes owed to CDTFA.
For more information on these changes, visit the CDTFA website at www.cdtfa.ca.gov or reach out to a GreenGrowth specialist!