Cannabis Cultivation Tax Rates to Increase on January 1, 2022
By Lauren Mendelsohn
November 17, 2021
The California Department of Tax and Fee Administration (CDTFA) has announced that effective January 1, 2022 the cannabis cultivation tax rates in California will be increased. The adjustment is due to inflation and is required under the State’s Cannabis Tax Law. Below is a table comparing the current cultivation tax rates to the rates effective January 1:
The cannabis cultivation tax is paid by licensed cultivators. Any sales or transfers made by a cultivator prior to 1/1/22 will be taxed at the “current rate” above. However, any sales or transfers from a cultivator on or after 1/1/22 will be taxed at the “new rate” above. Please refer to CDTFA’s Special Notice – Cannabis Rates Effective January 1, 2022 for more information.
CDTFA has also announced that they will not be increasing the mark-up rate for the cannabis excise tax rate until at least June 30, 2022. The cannabis excise tax is paid by consumers to licensed retailers at the time of sale. The mark-up rate for the excise tax, which is used to calculate the average market price of cannabis transferred from a licensed distributor to a licensed retailer in an arm’s length transaction, is currently 80%, and the excise tax rate itself is 15% of the average market price. Unlike the cultivation tax which must be adjusted for inflation, the CDTFA is merely required to “determine” the mark-up rate for the excise tax every six months, and can determine that it should remain the same. (Revenue & Taxation Code §§34010(b), 34012(k)).
A helpful guide for how to calculate and properly collect cannabis taxes can be found on CDTFA’s website.
Given how the cannabis industry is currently struggling with collapsing prices and ongoing licensing roadblocks, it will be interesting to see the response from operators and lawmakers to the increased cultivation tax rates.
This information is provided as a public educational service and is not intended as legal advice. For specific questions regarding cannabis laws and regulations in California, please contact the Law Offices of Omar Figueroa at 707-829-0215 or info@omarfigueroa.com to schedule a confidential legal consultation.