Cannabis Knowledge & Insights

How Do Cannabis Taxes Apply to Immature Plants, Seeds and Clones?

Learn how the cultivation, excise, and sales taxes apply differently to immature plans, seeds, and clones.

  • Cultivation tax does not apply to the sale of immature plants, seeds, and clones. 
  • Sales tax applies when any cannabis item (including plants, seeds and clones) is sold in the retail market. 
  • Excise tax is collected by the distributor when immature plants, seeds, and clones are sold/transported to a retailer.

Speak to one of our experts if you have any questions about these taxes. 

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The world of cannabis and cannabis taxes is ever changing.  Today, we will highlight three cannabis taxes (cultivation, excise, and sales) and how they apply to immature plants, seeds, and clones.

Cultivation Tax 

There is good news when it comes to cultivation tax. The cultivation tax was originally intended for those who grow, harvest, plant, dry, cure, grade or trim the cannabis plant.  Luckily, it does not apply to the sale of immature plants, seeds, and clones. Because the true intention of the cultivation tax is to tax harvested cannabis when it enters the commercial market, immature seeds and plants are not taxed.  If you’re looking for specific information regarding cultivation tax, read more about how the tax applies to retailers, manufacturers, cultivators, and distributors.

Sales and Use Tax 

A sales tax applies when any cannabis item is sold in the retail market.  This includes immature plants, seeds, and clones. The definition of use tax is extremely literal.  This tax is applied when the product is, literally, “used.”

When a cultivator purchases immature plants, seeds or clones, the sales and use tax does not apply if and when the product will eventually be used to grow inventory and sold in the cultivator’s retail setting.  Keep all records and resale certificates to show supporting documentation that these products were indeed intended for resale.  If you have additional questions about resale certificates, take a look at this article outlining further details.

Excise Tax 

With an excise tax, each license type has a slightly different rule.

  • When sold at retail – immature plants, seeds and clones are taxed at 15%.
  • The retailer must collect the cannabis excise tax from customers when the immature plants, seeds, and clones are sold in a retail environment.
  • Nurseries can sell immature plants, seeds or clones to another cannabis licensee. But, distributors must transport cannabis from the nursery to the licensee.
  • When immature plants, seeds, and clones are sold/transported to a retailer, the distributor must collect the 15% cannabis excise tax from the retailer. The distributor will need to determine the average market price of the immature plants, seeds, and clones.  For more detail on taxes and the average market price, read this article.

This article provides a quick overview, but there are many facets to cultivation, sales and excise taxes.  If you would like to talk further about this subject, contact Green Growth CPAs today and we would be happy to discuss your specific situation.

 

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