New California CDTFA Excise Tax Regs
CDTFA Releases Retail Calculation Examples
In a few days, all California cannabis retailers and microbusinesses making retail sales will need to begin collecting excise tax from their customers. The CDTFA released examples showing the correct calculation of excise tax and sales tax for all retail sales on or after January 1, 2023.
In their example, the selling price for of a cannabis product is $35.00. You deliver the item to the purchaser with your own vehicle and charge a $5.00 delivery fee. Their example also assumes an 8.5 percent sales tax rate and a 10 percent local (city) business tax which you separately state on the receipt to the purchaser.[1] For purposes of this article, we will assume that their city tax calculation is correct, however, each city is different and may include delivery in the taxable base.
Step 1 is the calculation of the excise tax.
Selling price of cannabis $ 35.00
City cannabis business tax $ 3.50
Delivery $ 5.00
Subtotal $ 43.50
Cannabis excise tax rate x 15%
Excise tax $ 6.53
(This example assumes that you separately state your business tax on your customer’s receipt. If it’s already included in the selling price, then it doesn’t become part of the calculation.)
Step 2 is the calculation of sales tax, which includes the excise tax.
Subtotal of cannabis + local tax +delivery $ 43.50
Excise tax (Subtotal x 15%) $ 6.53
Subtotal with excise tax $ 50.03
Sales tax rate x8.5%
Sales tax $ 4.25
Total due from customer $ 54.28
Total due to CDTFA ($6.53 + $4.25) $ 10.78
If you haven’t received the number for your cannabis retailer excise tax account, on or after January 1, 2023, you’ll be able to register for one at: Register.
Also, make sure to provide each customer with an invoice or receipt that separately states the cannabis excise tax they’re paying.
Your first payment of Cannabis Retailer Excise Tax will be due May 1, 2023 (because April 30, 2023 is a Sunday) for the period January 1-March 31, 2023. From then on, it will be due quarterly. Cannabis retailers may claim a credit on their cannabis retailer excise tax return for any cannabis excise tax paid to a distributor for cannabis or cannabis products purchased before January 1, 2023, and sold at retail on and after January 1, 2023.[2]
[1] https://www.cdtfa.ca.gov/industry/cannabis.htm#Retailers, Click on section: Example of Tax Computation Beginning January 1, 2023
