November 17, 2016
Medical Cannabis Tax Exemption Has Begun
Sacramento – The November 8, 2016 passage of Proposition 64 (The Control, Regulate and Tax Adult Use of Marijuana Act) exempts certain sales of medical marijuana from sales and use tax.
Sales of medical cannabis to those who have a medical marijuana identification card (MMIC) issued on a county-by-county basis by the California Department of Public Health (CDPH) and a valid government-issued identification card are now exempt from sales and use tax. Consumers can obtain the CDPH-issued cards at their county health department, at a cost that varies by county. A paper recommendation from a physician is not sufficient to qualify for this sales tax exemption.
This county-issued MMIC will have the State of California seal and indicate whether the card holder is a "patient" or "caregiver." The card will also contain the patient's or primary caregiver's photo, a nine-digit ID number, a CDPH website to verify the ID number, an expiration date, and the county that issued the card, as shown below. Cards are valid for the duration of the physician recommendation or up to one year, at which time the card must be renewed. Retailers should retain the purchaser's nine-digit ID number and expiration date, along with the related sales invoice or other record of sale, to support the exempt sale.
Exempted products include medical cannabis, medical cannabis concentrate, edible medical cannabis products, and topical cannabis. These terms are defined in Business and Professions Code section 19300.5.
Retailers should not collect sales tax reimbursement on qualifying exempt sales of medical marijuana. They should claim a deduction on their sales and use tax returns for their qualifying exempt medical marijuana sales. Retailers may verify the validity of a nine-digit ID number on the CDPH website
Sales of recreational marijuana will not start until January 1, 2018. Such sales will be subject to sales tax and an excise tax. A cultivator tax will also apply to marijuana beginning on that date.
The five-member California State Board of Equalization (BOE) is a publicly elected tax board. The BOE collects $60.5 billion annually in taxes and fees supporting state and local government services. It hears business tax appeals, acts as the appellate body for franchise and personal income tax appeals, and serves a significant role in the assessment and administration of property taxes. For more information on other taxes and fees, visit the California Tax Service Center.
Note: This news release may discuss complex tax laws and concepts. It may not address every situation, and is not considered written advice under Revenue and Taxation Code section 6596. Changes in law or regulations may have occurred since the time this news release was written. If there is a conflict between the text of this news release and the law, decisions will be based upon the law and not this news release. For specific help, please contact the BOE at 1-800-400-7115.