California’s Cannabis Dispensary Sales Tax Guide for Dispensary Businesses

September 16, 2020 0 Comment

California’s Cannabis Dispensary Sales Tax Guide – The only sure things are death and taxes. However, taxes don’t have to be the death of your cannabis dispensary or your mental state.

They can be confusing and change in the blink of an eye. Here is a nifty guide that will help you know what taxes apply to you and how to manage them.

Who’s in charge, anyway?

The California Department of Tax and Fee Administration (CDTFA) is the governing body that shows tax rules for the state of California.

Mark-up Rate

This rate is determined every six months by the CDTFA and is then used by distributors to find the average market price of cannabis products. They can be found on the Special Taxes and Fees Rate website under the Cannabis Taxes tab.  For the rest of 2020, the mark-up rate will remain at 80 percent.

Excise Tax Rate of Average Market Price

An excise tax is a flat rate tax that will have to be paid both by you and your customers. The Excise tax rate is currently 15 percent.

What Gets Taxed?

You will have to pay taxes just to open the door of your business. To obtain your license, you will have to pay the cannabis excise tax to the CDFTA.

You will have to charge and collect sales tax on all taxable retail sales of cannabis products.

You will want to file your sales tax and make sure to utilize your tax return. The cannabis excise tax will need to be charged to your customers who purchase your cannabis products.

The cannabis excise tax does not go away once you make your customers pay it. You also have to pay for it when you purchase products from your distributor.  You can choose to either pay or have your customer pay sales tax, but customers must pay the excise tax.  Anyone who purchases cannabis must recieve an invoice or receipt.

Discounted Sales will still have to be taxed. This applies both to regular discounts and deep discounts like a two for one promotion. Both standard discounts and deep discounts are taxed with excise taxes.

For Consignment Sales, you have to get a seller’s permit, and you will then be responsible for paying the sales tax on any sales.

What Should You Not Tax?

CBD Products: Here’s some good news, since CBD products are from industrial plants, they don’t contain cannabis and aren’t subject to the cannabis excise tax. This ruling stands even if the CBD product contains traces of THC.

Some Medicinal Products: In 2016, it was decided that some forms of medicinal cannabis are not going to have to have sales tax paid on them.

Donations: Donations are also not taxed. However, they have to be medical and be going to medicinal cannabis patients. This differs from just giving away cannabis for non-medical reasons, which you cannot do.

Purchases: If the investment aims to resell it, you can buy it without sales or use taxes being applied. If you end up using the product, though, rather than reselling it, then you owe taxes.

Other People Who Might Tax You

Your Local Government: Many cities have created rules that require cannabis dispensaries in the area to pay a cannabis business tax along with their other taxes.

If you are choosing to add the mark-up rate tax to your customer’s purchase, the amount that the sales tax percentage will be calculated will be the number after a local area’s tax has been added.

The Danger

By law, you are required to keep business records so that the accuracy of your taxes can be evaluated. The government will make sure that you have been doing your taxes right and keeping them up to date. Are you overwhelmed yet? Taxes can be scary, especially when doing them wrong can end you up in hot water.

How Do I Make This Easier?

Now that you have an overview of tax rules, you are probably wondering how in the world to simplify all this. How will I be able to keep up with everything? There is a software tool that is efficient, affordable, and completely automates your taxes. 

Their name is Zencanna, and they are revolutionizing the cannabis tax industry. Zencanna can automate your cannabis taxes so that the necessary taxes are automatically added on when a product is purchased. 

Zencanna will link all this information to your books so that you will never be confused again. They have excellent customer support that will walk you through any issues that may arrive. Transparency is also one of their high points; they make all your data easy to see so that you have access to everything they do. 

They are even able to automatically update the information when new tax laws come out. They help you keep up with the ever-changing tax scene of cannabis in California so you can stop worrying over taxes and get back to serving your customers.


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