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.
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.
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.
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.
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.
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
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.