It’s been a bit crazy around the California Department of Tax and Fee Administration, one of two new successor agencies to the State Board of Equalization. The state’s politicians and bureaucrats have been scrambling to reconstruct and redistribute most of the functions of an agency that’s been around for over 100 years. With all of that going on, some key changes to various laws and regulations have slipped through the cracks for many of the taxpayers we come in contact with on a consistent basis. With that in mind, I wanted to share an update on how medicinal cannabis is currently being treated in California for sales and use tax purposes.
Voters on November 9, 2016, passed Proposition 64 which paved the way for the legalization of recreational cannabis in California. While the recreational use of cannabis grabbed the headlines, there was a significant change to how the medicinal use of cannabis is taxed in the state, which went largely unnoticed by many in the industry.
As virtually everyone in the industry knew, medicinal cannabis was not exempt from sales tax in California prior to the passage of Proposition 64. While the issuance of a Public Health ID card permitted one to obtain and use restricted quantities for medicinal purposes, it did not exempt the drug from state sales tax. The passage of Proposition 64 changed that.