Cannabis Establishment Tax FAQs

Cannabis Establishment Tax FAQs

What are the taxes on cannabis?

Starting January 1, 2024, cannabis is taxed in the following way:

  • 15% Excise Tax on the first wholesale sale (calculated on the Fair Market Value for affiliate sales and calculated on the sales price for non‐affiliate sales); and
  • Sales Tax; and
  • 10% Retail Excise Tax on the sales price when sold by an adult‐use cannabis retail store. Cannabis or cannabis products sold to a patient cardholder are not subject to this 10% Excise Tax.

 Who pays taxes on cannabis?

  • Wholesale Cannabis Excise Taxes are the responsibility of the cultivation facility.
  • Retail Cannabis Excise Taxes are the responsibility of the adult‐use retail store, retail cannabis consumption lounge and an independent cannabis consumption lounge but may be recovered from the purchaser.

When is my Retail Cannabis Tax or Wholesale Cannabis Tax due?

  • Both Retail Cannabis and Wholesale Cannabis Taxes are due monthly, the last day of the month, after the period ends.
  • Example Scenario: 1/31/2024 is due by 2/29/2024. If the due date falls on a weekend or holiday, the tax is due the next business day.

Is the Retail Excise Tax imposed on the original price or discounted price?

  • The tax is imposed on the discounted sales price.
  • The sales price does not include cash discounts allowed and taken on the sales, meaning the sales price after any discount has been applied to the original price.

Is the Retail Excise Tax imposed on the original price or the price plus the Sales Tax?

  • The Retail Excise Tax is applied on the sales price, not including the Sales Tax.
  • The facilities must also file a monthly sales tax return that includes both the sales for adult‐use and the sales to patient cardholders.
  • Facilities who do not file each of the required returns – even if they do not owe tax – will receive delinquency notices from the Department.

Are there any exemptions for either Retail or Wholesale Cannabis Taxes?

  • Sales made to person holding a valid registry identification card, letter of approval, or is authorized to engage in the medical use of cannabis under his or her state or jurisdiction of residence.
  • Transfers of cannabis by a cannabis cultivation facility to another cannabis cultivation facility who share identical ownership*. This exemption is effective July 1, 2021.

*Ownership does not equate to corporate officers, directors, managers, or other key employees. Identical ownership means identical owners and identical interest as approved by Cannabis Compliance Board. 
Examples of similar but not identical ownership:

  • A Corp – 100% Alex
  • B Corp – 100% Bob
  • C Corp – 100% Carol
  • AB Corp – 50% Alex; 50% Bob
  • BC Corp – 50% Bob; 50% Carol
  • ABC Corp – 50% Alex; 25% Bob; 25% Carol
  • CBA Corp – 25% Alex; 25% Bob; 50% Carol

None of the above example corporations have identical ownership.  Note that ABC Corp and CBA Corp do have identical owners but do not have identical ownership.

What is an Affiliate and Non-Affiliate?

  • “Affiliate”, as defined by AB430 defines “affiliate” as a person who, directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with, a specified person.
  • “Non‐Affiliate” is anyone who does not fall into the definition of “affiliate.”

What is Fair Market Value?

  • Fair Market Value is the median sales price for wholesale sales between cannabis cultivation facilities and cannabis establishments that are not affiliates.
  • The Department calculates and publishes the Fair Market Value each quarter based upon the prior available 3 months of recorded non‐affiliate wholesale sales, as input by industry in the seed‐to‐sale tracking.

What if I file my taxes late, are there any additional penalties?

  • When a return is filed late, with partial, or no payment, penalties and interest are assessed.
  • A graduated penalty, up to 10% of the tax balance is assessed based on how late the payment was received.
  • The full 10% is assessed 30 days after the due date.
  • Interest is assessed at .75% monthly, on the tax portion of the unpaid balance, and is assessed on the 1st of each month after the due date.
  • Penalty and interest will not accrue on the unpaid penalty or interest.
  • Once the tax balance has been paid in full the accrual of penalty and interest stop.
  • A waiver of Penalties and/or Interest can be requested in certain circumstances.

What if I need to amend a Retail Cannabis and/or Wholesale Cannabis Tax return?

  1. Copy of the Retail Cannabis and/or Wholesale Cannabis Tax return for the period (month) in which sales were originally paid.
  2. Write “AMENDED” in black, in the upper right‐hand corner of the return.
  3. Line‐through originally reported figures, in black, leaving original figure legible.
  4. Enter corrected figures, in black, next to the figures lined out.
  5. Indicate amount of credit claimed.
  6. Include a written explanation and documentation substantiating the basis of the credit claim.
  7. Indicate whether a refund is requested or whether a credit will be used to meet current/future tax liability.

Are there any other fines or penalties associated with the cannabis industry?

  • There may be additional penalties or fines imposed by the Cannabis Compliance Board (CCB). For more information, please visit CCB.

Where can I find information regarding cannabis licensing and Cannabis Agent Cards?

Note: FAQs are for general guidance only. For written advice as it relates to your business, request an advisory opinion from the Department.

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