What You Need to Know About Marijuana Tax

On: April 6, 2023

As marijuana and its legalization of it becomes more prevalent, the IRS and state departments are making sure to release guidelines about the taxing of the industry. As with any new tax rules and regulations, it can be quite confusing, but, as a business owner, you are responsible for making sure your taxes are done correctly and all due taxes are submitted by the due date.

Marijuana taxes are nothing you want to forget about, even if it is an accident. The penalties and interest associated with doing so can cause your business financial strain. One of the best things that you can do to safeguard yourself and your business is to work with an experienced marijuana IRS tax expert.

Do I Need to Pay Marijuana Tax?

Paying taxes on your marijuana business is mandatory. There are roughly 170 different plant species that are available and all are subject to taxation. Both hemp and marijuana are considered to be cannabis plants and subject to taxation.

I Don’t Sell Marijuana, I Just Cultivate It. Am I Free From Taxes?

No. There is a cultivation tax that must be paid on all harvested cannabis. Anyone who is in charge of cultivating and growing marijuana is subject to the tax and responsible for making sure it is paid. Cultivation tax must be paid prior to selling the product to retailers.

What Is the Tax Rate in California?

There are several categories of taxes that are used when it comes to marijuana and cannabis, each with its own tax rate. The tax rates are as follows:

• $2.75 per ounce for the cultivation of any leaves
• $9.65 per ounce for the cultivation of any flowers
• $1.35 per ounce for the cultivation of any fresh plant materials
• 25% state retail sales tax plus any local taxes
• 15% excise tax on all retail sales

Can I Be Audited for Not Paying Marijuana Taxes?

Yes. Cannabis and marijuana businesses make a lot of money for the federal government due to how heavily they are taxed. Because of this, the high tax revenue alone increases your chances of being audited by the IRS.

Understanding and knowing all of the rules, regulations, and tax requirements surrounding your marijuana business is crucial, as it is your responsibility to make sure you remain in compliance. Working closely with a tax professional is always recommended to ensure you are doing everything correctly.

Leading Tax Group Is the Expert at Marijuana Taxes 

When you are in charge of managing a marijuana business, you want to remain in compliance at all times. An audit can quickly spiral out of control and leave you with hefty penalties to pay. One of the best decisions that you can make for yourself, and your business is to hire a marijuana tax expert to assist you in filing your taxes each year.

At Leading Tax Group, we can assist you in understanding what your legal obligations are when it comes to marijuana taxes. We will work closely with you and provide you with the assistance you need. If you find yourself going through a current marijuana tax audit, we provide aggressive representation to ensure you and your business get back on track.

Give Leading Tax Group a call today to discuss your current marijuana tax situation and to get the best representation in a marijuana tax audit!