As of January 1, 2023, cannabis retailers are now responsible for paying the cannabis excise tax. Before January 1, cannabis distributors were responsible for the tax. This is a pretty big change, and it is important for retailers and distributors to understand their new tax obligations. The cannabis excise tax remains at 15% and is based on gross receipts from the retail sale of cannabis. The 15% rate is subject to change as early as July 1, 2025.
According to the California Department of Tax and Fee Administration (“CDTFA”) website, “gross receipts” includes the sale price of cannabis and cannabis products (after discounts) plus all charges related to the sale, such as delivery fees and any local cannabis business tax. Gross receipts does not include the sales tax or the gross receipts from the retail sale of any non-cannabis item, such as t-shirts or other branded merchandise retailers may offer for sale.
The excise tax must be collected from purchasers at the time of retail sale. The tax must be listed separately on the receipt or invoice provided to the purchaser. Most importantly, all retailers must file cannabis retailer excise tax returns online and pay the cannabis excise tax collected from purchasers every quarter. The first excise tax return is due on May 1, 2023. If you are a retailer and you are unsure how to comply with your new tax obligations, call our office at (415) 441-1776 for a consultation from one of our attorneys.