California Tax Changes
As a cannabis consumer, you’ve probably heard about the tax increases that are coming to California’s legal cannabis market in 2020. But what does that mean for you?
Compare a sample sales receipt from Weden below to see just one example of how California’s cannabis taxes will increase on Jan. 1, 2020.
What taxes are increasing?
Beginning January 1, 2020, there will be increases to California’s cannabis excise tax and cannabis cultivation tax.
What is the California cannabis excise tax?
The California cannabis excise tax is a 15% tax, paid by consumers, on the average market price of all cannabis and cannabis products, including medical cannabis. The average market price is defined as the wholesale cost of the product, plus a predetermined mark-up set by the California Department of Tax and Fee Administration (CDTFA).
Prior to 2020, the mark-up rate determined by the CDTFA was 60%. Beginning January 1, 2020, the mark-up rate will increase to 80%.
Still not sure what that means for you? Here’s an example: Weden purchases a cannabis product at a wholesale cost of $30 per unit. Per the CDTFA, the average market price of that product will have an 80% mark-up, coming in at $54. The excise tax that you pay will be 15% of $54, which is $8.10. However, it’s important to remember, not all dispensaries and cannabis stores will apply that 80% mark-up on the products they sell; some will be more and some will be less (meaning that product could be listed at $45 or $60, instead of $54), but you will always pay the 15% excise tax based on the wholesale price plus the mark-up set up the CDTFA.
The CDTFA reevaluates the mark-up rate every six months.
What is the California cannabis cultivation tax?
The California cannabis cultivation tax is a tax imposed on the cultivation of cannabis for both adult and medical use. It is paid by cultivators to either the distributor or manufacturer.
The cultivation tax is evaluated and adjusted for inflation every year.
Where are my taxes going?
Even though Weden is responsible for collecting taxes, we don’t hold on to that money. All taxes that are collected are transferred to the appropriate local or state agency. California’s cannabis tax revenue pays for administrative costs associated with marijuana legalization, and then uses excess funds for programs related to drug use, including economic development, academic studies, and youth programs.
How can I save on taxes?
If you are a medical marijuana patient, you may be exempt from certain taxes. To obtain these tax exemptions, you (or a primary caregiver) must provide a valid Medical Marijuana Identification Card (MMIC) issued by the California Department of Public Health and a valid government-issued ID at the time of purchase.
Most medical marijuana recommendation providers do not include a MMIC in the cost of their services, but have the option to obtain one for an additional fee.
Why should I purchase from a legal retailer when black market shops don’t charge me any taxes?
There are several reasons you should only purchase from legal, licensed, and compliant cannabis retailers.
- Safety: the number one reason to only purchase from state-licensed dispensaries. All of the products carried by Weden are fully licensed and tested according to California state standards. Products sold by illegal retailers may contain harmful chemicals, pesticides, E. Coli, mold, or other toxic substances.
- Consistency: When products are regulated and tested, you can be sure you’re getting the same thing every time you buy.
- Trust: As a legal and compliant dispensary, Weden is committed to maintaining quality customer service relationships with the community. We will always have your best interests in mind. To learn more, check out the Bureau of Cannabis Control’s #WeedWise campaign!
How can I support lower taxes?
Weden frequently runs deals and specials to help offset the cost of taxes that we have no control over. The best way to support lower taxes is to reach out to your city-, county- and state-elected officials to voice your opinion and lobby for change.