Cannabis Taxes

1.) California Cannabis Taxes Explained

Cannabis is now legal for everyone over 21 in California, and that means unavoidable taxes – whether you have a doctor’s recommendation or not.

But medical card holders willing to jump through a few hoops can still claim one significant tax advantage: up to 10% off all retail marijuana purchases.

It takes an extra step: Bring your recommendation to your county’s public health department, and for a $100 fee you’ll be issued a Medical Marijuana Identification (MMID) card that exempts you from “sales and use” tax for one year. Depending on your location, sales and use taxes are 7% to 10% of the total transaction (including other taxes!). In all, there are three types of California cannabis taxes. The other two, another 15% or more, cannot be avoided.

2.) What are the three types of taxes on cannabis?

Excise Tax: This state tax is tied to the wholesale price, and comes out roughly to 15% of retail. It is generally the highest and most consistent tax on cannabis, and it cannot be avoided—not even discounts bring excise taxes down.

Local Tax: Some California cities and counties tax licensed retailers operating within their borders. Rates and rules range from zero tax to as much as 10% (even 15% in rare cases). This tax calculated from the combined total of retail price and excise tax. Most consumers will see a modest upcharge—5–7% on average—in this category, which also cannot be avoided.

Sales and Use Tax: Also a state tax, “sales and use” rates start at 7.25% California-wide, but grow quickly to 10% or more as jurisdictions add “district” taxes, some of them overlapping. It is generally the second-highest tax on cannabis—it’s calculated upon the combined total of retail price, excise tax, AND local tax where applicable —and if you have an MMID card, you don’t have to pay it!

3.) Why doesn’t my doctor’s recommendation exempt me automatically?

Because it’s not registered with the state of California, which collects sales and use taxes.

A doctor’s recommendation is a statement from a state-licensed physician that allowed patients to purchase medical marijuana from licensed dispensaries prior to January 1, 2018. They’re still available, but you no longer need one to purchase cannabis in California if you’re 21 or older.

A Medical Marijuana Identification Card is a state-issued license that allows you to buy cannabis without paying sales and use tax. MMIDs require a doctor’s recommendation—your current one will do, as there is no additional screening—to be registered at your county’s public health department. A state MMID costs $100 annually.

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