From July 1st, 2022 the cultivation tax ceases to be applicable to marijuana or marijuana-related products that make it into the market for commercial use. Manufacturers and distributors do not have to collect the tax from cultivators if a cultivator transfers or sells cannabis to a distributor or manufacturer on or following July 1st, 2022.
What happens if a grower is selling cannabis to a manufacturer or distributor on or following the 1st of July 2022?
The manufacturer or distributor should not charge the cultivation tax to the cultivator. The invoice that’s sent between the cultivator and the manufacturer or distributor must show that no cultivation tax was due.
What happens when a grower is selling marijuana to a manufacturer or distributor prior to the 1st of July, 2022, and the marijuana or marijuana products are sold on the commercial market on or following July 1st, 2022?
The cultivation tax isn’t payable on marijuana or marijuana products that are released on the commercial market from and after July 1st, 2022, regardless of whether the cultivator had sold the marijuana or transferred it before July 1st, 2022. All cultivation tax that’s collected on cannabis that is sold or transferred to the market commercially from July 1, 2022, or later must be returned to the grower who paid the initial cultivation tax. Cannabis is commercially available after the marijuana or marijuana-related products have passed the tests required and passed the quality assurance reviews.
How can a manufacturer pay the excess cultivation tax?
A manufacturer that has collected cultivation tax and is not able to refund it back to the farmer who paid it has to transfer the excess tax to a distributor to allow the distributor to fulfill the excess cultivation tax to CDTFA.
How can a distributor pay the excess tax on cultivation?
A distributor is required to pay the extra cultivation tax to CDTFA by filing to pay the additional tax on their next return of tax on cannabis.
We recommend reading the CDTFA’s online Tax Guide for Cannabis Businesses at http://www.cdtfa.ca.gov/industry/cannabis.htm, to learn more about these changes.
Looking for More Information?
For more information, visit the CDTFA’s website at http://www.cdtfa.ca.gov. You can also call the Customer Service Center at 1-800-400-7115 (CRS:711) and then choose the option Additional Taxes and Fees. The CDTFA’s customer service agents are ready to assist you Monday through Friday from 7:30 a.m. until 5:00 p.m. (Pacific Time), excluding public holidays.