Selling cannabis you acquired before 1/1/2018...California Department of Tax and Fee Administration – Adoption of Emergency Regulation 3701 “They want they money” (Excise Tax)!
The California Department of Tax and Fee Administration has adopted proposed emergency Cannabis Tax Regulation 3701, Collection and Remittance of the Cannabis Excise Tax, to address an issue regarding the collection and remittance of the cannabis excise tax on retail sales of inventory acquired by cannabis retailers prior to January 1, 2018, before the tax is effective January 1, 2018.
Some cannabis retailers will have possession or control of an inventory of cannabis, cannabis products, or both on January 1, 2018, which was not purchased or acquired from a distributor, as defined in RTC section 34010, subdivision (l). There is an issue because it is not clear how or when those cannabis retailers will remit the cannabis excise taxes collected on their retail sales of cannabis and cannabis products from inventory acquired prior to January 1, 2018. The Department has determined that it is necessary to address this issue through the adoption of an emergency regulation before the cannabis excise is effective January 1, 2018. Therefore, the Department drafted Regulation 3701 to have the effect and accomplish the objective of addressing the issue by:
- Incorporating the provisions of RTC section 34011, subdivision (e), which expressly prohibit a cannabis retailer from making retail sales of cannabis or cannabis products on or after January 1, 2018, including inventory acquired prior to January 1, 2018, unless the excise tax has been paid to the retailer by the purchaser at the time of the sale;
- Clarifying that when a distributor sells or transfers cannabis or cannabis product to a cannabis retailer on or after January 1, 2018, then the retailer shall remit the cannabis excise tax due on the retail sale of the cannabis or cannabis product to the distributor that sold or transferred the cannabis or cannabis product to the retailer in accordance with RTC section 34011, subdivision (b)(1) (quoted above);
- Clarifying that when a cannabis retailer makes retail sales of cannabis and cannabis products acquired prior to January 1, 2018, which is possessed or controlled by the cannabis retailer at 12:01 am on January 1, 2018, the cannabis retailer is required to remit the excise tax due to a licensed distributor that the retailer purchased or acquired cannabis or cannabis product from on or after January 1, 2018, on or before the fifteenth day of the calendar month following the close of the calendar month in which the tax was collected by the cannabis retailer;
- Prescribing the invoice, receipt, or similar document that a distributor is required to provide to a cannabis retailer when collecting excise tax due on cannabis and cannabis products acquired prior to January 1, 2018, and requiring it to include the date of execution, name of the distributor, name of the retailer, amount of cannabis excise tax paid, the retailer’s seller’s permit number, and either the distributor’s seller’s permit number or a statement that the distributor is not required to hold a seller’s permit because the distributor makes no sales, in accordance with the authority granted to the Department in RTC section 34011, subdivision (b)(2) (quoted above); and
- Clarifying that a distributor is generally required to report and remit the excise taxes it collects from cannabis retailers in accordance with Regulation 3700, subdivision (e), but a distributor is required to report and remit the cannabis excise taxes collected on retail sales of cannabis and cannabis products acquired by cannabis retailers prior to January 1, 2018, with the distributor’s first return subsequent to receiving the cannabis excise tax from the cannabis retailer.
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