What You Need to Know About Marijuana Taxes Now and in 2018

 Posted on December 21, 2016 in Taxation Law

With voters' approval of Proposition 64 in November 2016, recreational marijuana has been legalized in California. This new law also creates tax implications for marijuana dispensaries now and changes that have to be implemented in 2018.

One of the benefits that supporters of Proposition 64 cited was that legalizing recreational marijuana would bring in more tax dollars to the state. This is true, according to estimates that project an additional $1 billion per year in tax revenue after the law goes into effect in 2018.

However, while the law will raise additional tax dollars, the state may also lose money because it will no longer collect taxes on medical marijuana sales.

Proposition 64 and Medical Marijuana

Since November 9, 2016, California no longer implements a sales tax on medical marijuana sales. This is because users of medical marijuana feared that if Proposition 64 passed, marijuana prices would be driven up. Thus, it was agreed that medical marijuana would be sales tax exempt if the proposition passed.

But, what does this mean for medical marijuana dispensaries? For the sales tax exemption to apply, the purchaser has to provide, at the time of purchase, his or her Medical Marijuana Identification Card issued by the California Department of Public Health under section 11362.71 of the Health and Safety Code. The purchaser must also provide a government-issued identification card at the time of the sale.

Sellers of medical marijuana will then be able to claim the transaction as an exemption on their sales and use tax return. It is important to note that sellers must retain all relevant supporting documentation to back up the exempt sales.

Proposition 64 and Recreational Marijuana

Starting January 1, 2018, there will be a 15 percent "excise tax" imposed on all purchases of marijuana. This excise tax will be applied to medical marijuana as well. Thus, buyers of recreational marijuana will have to pay a 15 percent excise tax as well as sales tax.

Call a Santa Clara County Tax Attorney for More Information

The laws surrounding marijuana sales are rapidly changing. While marijuana businesses are expected to keep up, oftentimes they need help to understand how new measures will affect their businesses. By turning to skilled a San Jose tax law attorney at John D. Teter Law Offices, you can be sure that you are following the "rules" and making the best use of the law. Contact our office at 408-866-1810 for more information.

Source:

https://www.boe.ca.gov/pdf/l481.pdf