California Lawmakers Considers Lowering Taxes On Cannabis, To Help New Legal Industries Compete With The Black Market

California Lawmakers Considers Lowering Taxes On Cannabis, To Help New Legal Industries Compete With The Black Market

January 30, 2019

 

A bill was introduced Monday in the California legislature that would give legal cannabis businesses a tax break to help them thrive and better compete with the underground market.

 

Introduced by Assembly Members Bonta, Cooley, Jones-Sawyer,Tom Lackey Of Palmdale, And Coauthor By Assembly Member Mark Stone

 

 

 

 

AB 286, as introduced, Bonta. Taxation: cannabis.

 

Courtesy of Click here for more information http://leginfo.legislature.ca.gov/faces/billAnalysisClient.xhtml?bill_id=201920200AB286

 

The Control, Regulate and Tax Adult Use of Marijuana Act (AUMA), an initiative measure approved as Proposition 64 at the November 8, 2016, statewide general election, and additionally amended by statute, imposes an excise tax commencing January 1, 2018, on the purchase of cannabis and cannabis products at the rate of 15% of the average market price of any retail sale by a cannabis retailer

 

Commencing January 1, 2018, AUMA also imposes a cultivation tax upon all cultivators on all harvested cannabis that enters the commercial market, at specified rates per dry-weight ounce of cannabis flowers and leaves. Existing law requires the revenues from those taxes to be deposited into the California Cannabis Tax Fund and to be continuously appropriated for specified purposes pursuant to a specified schedule. AUMA authorizes the Legislature to amend its provisions with a 2/3 vote of both houses to further its purposes and intent.

 

This bill would reduce that excise tax rate to 11% on and after the operative date of this bill until June 1, 2022, at which time the excise tax rate would revert back to 15%. This bill would suspend the imposition of the cultivation tax on and after the operative date of this bill until June 1, 2022.

 

This bill would make specified findings and declare that its provisions further the purposes and intent of the AUMA.

This bill would take effect immediately as a tax levy, but its operative date would depend on its effective date.

DIGEST KEY

Vote: 2/3   Appropriation: no   Fiscal Committee: yes   Local Program: no  

BILL TEXT

THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

 

SECTION 1.

 The Legislature finds and declares all of the following:

(a) In 2016, California voters approved Proposition 64, the Control, Regulate and Tax Adult Use of Marijuana Act (AUMA). In its statement of purpose and intent, AUMA calls for regulating marijuana in a way to “prevent illegal production or distribution of marijuana,” “reduce barriers to entry into the legal, regulated market,” and “tax the growth and sale of marijuana in a way that drives out the illicit market for marijuana and discourages use by minors and abuse.”

(b) In 2017, the Legislature and the Governor passed Senate Bill 94 to merge the AUMA regulatory system with the state’s medical marijuana regulatory system known as the Medical Cannabis Regulation and Safety Act. Currently, taxes on legal cannabis product include a sales tax, a 15-percent excise tax, and a cultivation tax of $9.25 per ounce of flowers or $2.75 per ounce of leaves. The cumulative tax rate imposed by existing law is substantial and undermines the legal regulatory system if high taxes cause prices to far exceed that what is found on the black market.

(c) It is the intent of the Legislature that this act suspend the cultivation tax rate for some of the first few years of that market as marijuana businesses come into that market.

(d) It is the intent of the Legislature that if the revenues collected from the excise tax on cannabis that was reduced by this act are projected to be insufficient to adequately fund the reasonable regulatory costs described in subdivision (a) of Section 34019 of the Revenue and Taxation Code as well as the program funding allocations described in subdivisions (b) to (d), inclusive, of Section 34019 of the Revenue and Taxation Code, the Legislature will consider enacting subsequent legislation restoring the rate of the excise tax to the rate that existed before this act.

SEC. 2.

 Section 34011 of the Revenue and Taxation Code is amended to read:

 

34011.

 (a) (1) Effective January 1, 2018, On and after the operative date of the act amending this section, and before June 1, 2022 a cannabis excise tax shall be imposed upon purchasers of cannabis or cannabis products sold in this state at the rate of 15 11 percent of the average market price of any retail sale by a cannabis retailer. retailer, and at a rate of 15 percent on and after June 1, 2022. A purchaser’s liability for the cannabis excise tax is not extinguished until the cannabis excise tax has been paid to this state except that an invoice, receipt, or other document from a cannabis retailer given to the purchaser pursuant to this subdivision is sufficient to relieve the purchaser from further liability for the tax to which the invoice, receipt, or other document refers.

(2) Each cannabis retailer shall provide a purchaser with an invoice, receipt, or other document that includes a statement that reads: “The cannabis excise taxes are included in the total amount of this invoice.”

(3) The department may prescribe other means to display the cannabis excise tax on an invoice, receipt, or other document from a cannabis retailer given to the purchaser.

(b) (1) A distributor in an arm’s length transaction shall collect the cannabis excise tax from the cannabis retailer on or before 90 days after the sale or transfer of cannabis or cannabis product to the cannabis retailer. A distributor in a nonarm’s length transaction shall collect the cannabis excise tax from the cannabis retailer on or before 90 days after the sale or transfer of cannabis or cannabis product to the cannabis retailer, or at the time of retail sale by the cannabis retailer, whichever is earlier. A distributor shall report and remit the cannabis excise tax to the department pursuant to Section 34015. A cannabis retailer shall be responsible for collecting the cannabis excise tax from the purchaser and remitting the cannabis excise tax to the distributor in accordance with rules and procedures established under law and any regulations adopted by the department.

(2) A distributor shall provide an invoice, receipt, or other similar document to the cannabis retailer that identifies the licensee receiving the product, the distributor from which the product originates, including the associated unique identifier, the amount of cannabis excise tax, and any other information deemed necessary by the department. The department may authorize other forms of documentation under this paragraph.

(c) The excise tax imposed by this section shall be in addition to the sales and use tax imposed by the state and local governments.

(d) Gross receipts from the sale of cannabis or cannabis products for purposes of assessing the sales and use taxes tax under Part 1 (commencing with Section 6001) shall include the tax levied pursuant to this section.

(e) Cannabis or cannabis products shall not be sold to a purchaser unless the excise tax required by law has been paid by the purchaser at the time of sale.

(f) The sales and use taxes imposed by Part 1 (commencing with Section 6001) shall not apply to retail sales of medicinal cannabis, medicinal cannabis concentrate, edible medicinal cannabis products, or topical cannabis as those terms are defined in Division 10 (commencing with Section 26000) of the Business and Professions Code when a qualified patient or primary caregiver for a qualified patient provides his or her their card issued under Section 11362.71 of the Health and Safety Code and a valid government-issued identification card.

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