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What you need to know about collecting cannabis taxes

On: March 6, 2020

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If you are a cannabis business in California, collecting and paying cannabis taxes is going to be part of your everyday life. By knowing exactly what you need to be collecting, you’ll not only make your business run smoother, but you’ll stay out of trouble with the law. While cannabis businesses are not the only ones required to pay taxes, there are more regulations and systems in place than other businesses. In California, there are extra cannabis taxes that will need to be collected as well. What cannabis taxes do I need to know about? If you are a business operating with marijuana, you are going to run into some pretty hefty taxes that are pretty much unavoidable. The cannabis sales tax is one that is paid by all parties at some point in the selling chain. For cultivators, this sales tax is based on the amount of cannabis that is grown to be sold and based on weight. Currently, the rate is $9.25 per ounce of marijuana flowers, $2.75 per ounce of leaves, and $1.29 per ounce of fresh cannabis plant. For distributors or retailers, the cannabis tax is mostly from the excise tax, which is a tax imposed on a specific good, such as gas or tobacco.  When adding up local taxes, including the state tax of 7.25 percent plus local rates, a 15 percent excise tax (on the average item), and a varying cannabis business tax, which can be anywhere from 5 to 15 percent, there can be a hefty amount taken out for taxes. Those taxes are paid by the retailer to the distributor. The majority of the time, the excise tax is found in the total retail purchase and is required to be put on the invoice or receipt. It is one of the taxes that must be paid by all parties regarding cannabis. Keeping track of all receipts and invoices is one of the most important things you’ll need to do, as it is required by state and federal tax agencies. On top of the cannabis taxes, you’ll be required to have a sellers permit and pay all the other business and payroll taxes that may come with operating a cannabis business. What do I need to do for cannabis taxes? While you will be required to pay all the taxes you and your business may owe by the required time, there are some steps you can take to make your life easier. Record-keeping is a crucial and necessary part of owning a cannabis business. By keeping track of all your cannabis taxes, you will not only make your day a little bit less stressful, but you will stay out of trouble with the law. Being up to date on all the current California laws and regulations is a big part of keeping your business up and running, as things change all the time whether you know about them or not. While it is a lot of work and time to keep a cannabis business up and running, being organized and up to date will keep you alive. And always make sure to call Leading Tax Group and don’t attempt to do it yourself.
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