California to Raise Cannabis Flower, Leaves, Plant Taxes

Taxes on cannabis leaves, flowers and plants will be raised by the California Department of Tax and Fee Administration (CDTFA) effective Jan. 1,2020. The increase in cultivation tax rates reflect an adjustment for inflation, as required by the Cannabis Tax Law.

The adjusted rates will be reflected on the monthly and quarterly cannabis tax returns beginning Jan. 1.

Taxes for flower will increase from $9.25 per dry-weight ounce to $9.65; taxes for leaves per dry-weight ounce will increase from $2.75 to $2.87; and fresh cannabis plants per ounce will increase from $1.29 to $1.35.

On or after Jan. 1, 2020, the rates apply to cannabis that a cultivator sells or transfers to a manufacturer or distributor. Cultivator cannabis sales or transfers made prior to Jan. 1, 2020, will use the current rate listed above.

An analysis of statewide market data was used to determine the average mark-up rate between the wholesale cost and the retail selling price of cannabis and cannabis products. Based on this analysis, effective Jan. 1, 2020, the mark-up rate will be set at 80%.

The 15% cannabis excise tax is based on the average market price of the cannabis or cannabis products sold in a retail sale. The mark-up rate is used when calculating the average market price to determine the cannabis excise tax due in an arm’s length transaction. In an arm’s length transaction, the average market price is the retailer’s wholesale cost of the cannabis or cannabis products, plus the mark-up rate determined by the CDTFA. In a nonarm’s length transaction, the average market price is the cannabis retailer’s gross receipts from the retail sale of the cannabis or cannabis products.

For current cannabis mark-up and tax rates, see our Special Taxes and Fees rate page at www.cdtfa.ca.gov/taxes-and-fees/tax-rates-stfd.htm, under Cannabis Taxes.