The California Tax Service Centre applies sales tax to tangible items including antiques, clothing, furniture, giftware, and toys. However, it exempts certain products with a ‘social welfare flavor’ for example:
- Food stamp purchases
- Specified food products
- Specified medical devices
- Prescription medicines
Therefore, the Board of Equalization’s special notice to exempt qualifying sales of medical marijuana from sales tax was an unsurprising, yet welcome decision. We thought it an appropriate time to review the November 2016 regulations, as California’s medical marijuana industry moves steadily in the direction of becoming formal business.
This sales-tax concession only applies to medical cannabis, medical cannabis concentrate, and edible and topical medical cannabis products as described in section BPC 19300.5 of the Medical Cannabis Regulation and Safety Act. The purchaser must furthermore tender their valid Medical Marijuana Identification Card at the point of sale.
With this decision comes a small pile of bureaucratic processes. To secure an exempt sale, a medical marijuana retailer must (a) verify the identification of the purchaser using their official medical marijuana identification card, and (b) maintain certain records of the sale.
Qualification of Retailers and Purchasers for Tax-Exempt Sales
Retailers may not collect sales tax reimbursement from medical marijuana purchasers, with respect to qualifying exempt sales. Moreover, they should also claim a reduction on their sales and use tax returns with respect to these exempt transactions. Furthermore, they must maintain the follow records in order to prove these entitlements:
Relevant sales invoices or other records, plus the following information obtained from the patient or primary caregivers valid, unexpired medical marijuana card issued by the California Department of Public Health.
- The nine-digit identity number
- The expiration date on the card
Further details, such as the customer name and address are not mandatory for tax purposes, as the public health authority already has the information on file.
Further Information Available from California Government Sources
The California Board of Equalization maintains a Tax Guide for Medical Cannabis Businesses. The dispensaries section provides a narrower focus on sellers’ permits, sales tax matters, consignment sales, purchases, and maintaining records.
Furthermore, retailers can confirm the validity of a caregiver or patient nine-digit identification card by visiting the California Department of Public Health website. This free service is open to the public, and to law enforcement officials verifying the holder’s right to grow, transport, possess, and / or use medical marijuana within California.