California has long been known as a heavy-tax-burden state when it comes to the cannabis industry. One of the most egregious examples of this has been the requirement that cannabis retail businesses count as part of their gross receipts the state excise and local cannabis taxes they collect. This forces them to pay to the CDTFA 15% sales tax on those taxes. In addition, certain municipalities have required cannabis businesses to include excise tax collected as part of their gross receipts calculations. All of this would change on January 1, 2024, if Senate Bill 512 passes.
SB-512 states, “This bill, beginning January 1, 2024, would exclude from the term “gross receipts” under the Sales and Use Tax Law the amount of the cannabis excise tax imposed under the Cannabis Tax Law and the amount of any tax imposed by a city or county on the privilege of engaging in commercial cannabis activity, as specified. The bill, beginning January 1, 2024, would also prohibit a city or county from including in the definition of gross receipts, for purposes of any local tax or fee on the privilege of engaging in commercial cannabis activity, as specified, the amount of any cannabis excise tax imposed under the Cannabis Tax Law or any sales and use taxes.”
Should SB-512 pass, excise tax and any local cannabis taxes would be excluded from the calculation of sales tax. Similar actions would also be prohibited for any aggressive cities that now require such tax-on-tax calculations.
SB-512 was introduced into the state senate on Valentine’s Day 2023 by Senator Steven Bradford (D), whose district includes parts of the cities of Los Angeles and Long Beach. It is currently being discussed in the Committee on Governance & Finance.