Some Interesting Facts on Cannabis Cultivation Tax in California

According to state laws, it’s legal for adults over 21 years of age to grow, process, sell, or consume recreational marijuana in 11 states and a total of 33 states and the District of Columbia allow medical marijuana sales and consumption. If you’re in California, the Cannabis Cultivation Tax is something you must be familiar with in order to legally operate.

What is the current state of Cannabis tax in California?

In addition to the sales and use tax, California cannabis businesses pay two unique taxes: The cannabis excise tax, and the cannabis cultivation tax.

Below are some interesting facts on Cannabis cultivation tax in California:

  • California is the world’s largest market for recreational marijuana with legal sales totaling approximately $3.1 billion in 2019.

  • The cultivation tax is imposed on “all harvested cannabis that enters the commercial market” at the rate of:

  • Effective January 1, 2020, $9.65 per dry-weight ounce of cannabis flowers (formerly, $9.25);
  • Effective January 1, 2020, $2.87 per dry-weight ounce of cannabis leaves (formerly, $2.75); and
  • Effective January 1, 2020, $1.35 per ounce of fresh cannabis plant (formerly, $1.29)

However, these rates are subject to change and must be researched often.

  • “Enters the commercial market” means, once the product passes through the quality assurance and review testing as required in the Medicinal and Adult-Use Cannabis Regulation and Safety Act, it is considered to enter the commercial market.
  • A “manufacturer” holds a Type 6 or 7 license. 18 CCR 3700(a)(8). The term refers to a licensee that conducts the production, preparation, propagation, or compounding of cannabis or that packages or labels the product.
  • Cultivators are required to pay the tax to either the distributor or a manufacturer.
  • You can avoid paying the tax if you donate medicinal cannabis designated for donation. RTC 34012(i). Make sure to report it correctly in the METRC track and trace system so you won’t have mismatches in your audits.
  • California Governor Gavin Newsom (D) has supported simplifying marijuana tax administration by collecting retail tax at the retail level and cannabis cultivation tax in California from the first distributor but has postponed the process to 2021 due to the coronavirus outbreak. (we will keep you updated)
  • California allocates some revenue to regulatory costs and research. After that is funded, additional revenue, approximately $200 million, goes to youth anti-drug programs (60%), environmental programs (20%), and public safety grants (20%).

Interested in knowing more about the cannabis cultivation tax in California? YourCannaCFO is at your service. Simply contact us to fix an appointment or read more of our blogs for more information.

Published On: June 23rd, 2020 / Categories: Cannabiz Accounting, Taxes / Tags: , , /

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