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Attention California Cannabis Distributors: First Quarter 2018 Cannabis Tax Return Is Due April 30, 2018

Starting in 2018, cannabis distributors must file quarterly tax returns with the California Department Of Tax And Fee Administration (“CDTFA”). The cannabis tax return and payment of the cannabis taxes for the period January 1, 2018, through March 31, 2018, are due by April 30, 2018. This return is available online through the CDTFA website from the Log In page by using your User ID and Password, or your Express Login Code and the Account Number.

As a cannabis distributor, you are responsible for reporting and paying both the cannabis excise tax collected from retailers to whom you sold or transferred cannabis or cannabis products, and the cultivation tax you collected from cultivators and manufacturers. You will report both these cannabis taxes on the same electronic return. Here are general instructions to correctly report the excise and cultivation taxes on the cannabis return.

Cannabis Excise Tax

To report the excise tax, you must enter the average market price of your sales or transfers of cannabis or cannabis products to a retailer during the reporting period in which the sale or transfer occurred. You must separately enter the total average market price on sales of medicinal cannabis and on sales of adult-use cannabis; there is a separate line on the return for each. The cannabis return will automatically compute the excise tax due based on the amounts entered.

The “Add Excess Excise Tax Collected, if any” box is used to report:

  • Any amount of tax that was collected in excess of the amount of tax that is due and was not returned to the retailer and/or retail purchaser.
  • The cannabis excise tax retailers paid to you on cannabis or cannabis products that were not purchased from you prior to January 1, 2018, and sold at retail on or after January 1, 2018.

Cultivation Tax

To report the cultivation tax, you must enter the category (flowers, leaves, or fresh cannabis plant) and ounces of cannabis that you acquired from a cultivator or a manufacturer during the reporting period that the cannabis enters the commercial market (that is, passes the required testing and quality assurance review). You must separately enter the weight and category for medicinal cannabis and for adult-use cannabis. The cannabis return will automatically compute the cultivation tax due based on the amounts entered.

Penalties For Noncompliance

The cannabis tax law imposes a mandatory 50% penalty for failure to pay the cultivation tax or cannabis excise tax when due. If you fail to pay the cannabis taxes by your due date, you may be relieved of the 50% penalty if the CDTFA finds that your failure to timely pay was due to reasonable cause and circumstances beyond your control, and occurred notwithstanding the exercise of ordinary care and absence of willful neglect.

Duty To Maintain Records

You are required by law to keep business records so that the CDTFA may verify the accuracy of your sales and use tax (if applicable) and cannabis tax returns and determine how much tax is due. Since the CDTFA has up to three years to select your account for audit, you will want to keep these records for at least three years.

What Should You Do?

It is enough that cannabis businesses have to deal with the uncertainty of the Federal government in enforcing the Federal law that makes it a crime to possess and sell cannabis. Make sure that your cannabis business is in compliance with California Cannabis Taxes by engaging the tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), Inland Empire (Ontario) and other California locations. We can come up with solutions and strategies to these challenges and protect you and your business to maximize your net profits.

    Request A Case Evaluation Or Tax Resolution Development Plan

    Get a Tax Resolution Development Plan from us first before you attempt to deal with the IRS. There are several options for you to meet or connect with Board Certified Tax Attorney Jeffrey B. Kahn. Jeff will review your situation and go over your options and best strategy to resolve your tax problems. This is more than a mere consultation. You will get the strategy or plan to move forward to resolve your tax problems! Jeff’s office can set up a date and time that is convenient for you. By the end of your Tax Resolution Development Plan Session, if you desire to hire us to implement the strategy or plan, Jeff would quote you our fees and apply in full the session fee paid for the Tax Resolution Development Plan Session.

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