California State Licensing and Taxation Requirements Regarding Dispensaries

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California State Licensing and Taxation Requirements Regarding Dispensaries

Below is a list of some applicable taxes and licensing requirements for dispensaries in California. 

Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) 

In California, all dispensaries are regulated by the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA), and consolidated under Senate Bill SB 94. AB 266 allows for businesses to obtain operational medical marijuana licenses from the state of California. It also legalizes all commercial cannabis activities by licensed California dispensaries. It gives local jurisdictions the power to tax and assess fees against California dispensaries. AB 243 regulates cannabis growers and SB 642 sets licensing standards for physicians who recommend medical marijuana to patients.

Tax Treatment 

The state of California disallows the deduction of all busi ness expenses for medical marijuana dispensaries that are  not being taxed as a corporation under the State Revenue  and Taxation Code. However, if the dispensary is structured  in order to be taxed as a corporation, the deduction of all  necessary and ordinary businesses expenses is permitted,  as long as the dispensary maintains the proper records to  support such deductions. 

Seller’s Permit 

The state of California requires all dispensaries, including  mobile dispensaries, to apply for a seller’s permit with the  Board of Equalization (BOE). There is no fee to apply for  a seller’s permit and it can be done via the BOE’s Online  Registration. 

Sales Tax 

All retail sales of medical cannabis products and accessories  are subject to California sales tax. California dispensaries are  required to pay sales tax on a quarterly prepay, quarterly,  monthly, fiscal yearly, or yearly basis based on the dispensa ry’s reported sales or anticipated taxable sales at the time of  registration for a Seller’s Permit with the BOE. The statewide  sales tax on Cannabis is 15%. 

However, California dispensaries should also pay close  attention to the laws regarding the taxation of medical  marijuana as changes can occur. 

Resale Certificates 

To mitigate having to pay taxes on purchases of medical  marijuana and marijuana-related products, dispensaries  must obtain a resale certificate to present to the supplier at  the time of purchase. These resale certificates are available  at California office supply and stationery stores and should  include the necessary information to ensure that the form  is a Board-approved retail certificate. One resale certificate  should be kept on-file per vendor and the same resale  certificate can be used each time a purchase is made from  that specific vendor. 

Payroll Tax 

If your dispensary has employees, you will also be required  to report wages and pay Income tax, Social security and  Medicare taxes to the Employment Development Depart ment (EDD) on a quarterly basis. The full requirements for  reporting and depositing payroll taxes in California can be  found at taxes.ca.gov 

Record Keeping 

California dispensaries are required by law to maintain  specific records so that the Board of Equalization can verify  the accuracy of filed sales and use tax returns. These re cords must be maintained for at least 4 years. These records  include sales and purchase records, bank statements, resale  certificates, shipping documents, and tax returns. A com prehensive list of the books and records that are required  to be maintained can be found here. 

Depending on the other products and services that your  business provides, there may also be other state taxes that  apply to your business, including property tax and special  taxes. Contact the appropriate offices to learn more.

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