Cannabis retailers in the United States face a complex tax environment. In addition to federal taxes, cannabis retailers must also pay state and local taxes. Here an outline of the different taxes that cannabis retailers may be required to pay:
- Cannabis retailers in California are subject to state and local sales tax, just like any other business. The state sales tax rate in California is currently 7.25%, and local jurisdictions may impose additional sales taxes on top of this. For example, in Oakland, the total sales tax rate is currently 10.25%.
- In addition to state and local sales taxes, cannabis retailers must also pay a state excise tax on all cannabis and cannabis products they sell. This tax is currently 15% of the wholesale cost of the product.
- Cannabis retailers must also pay an annual cultivation tax based on the weight of the cannabis they cultivate. The tax rate for cannabis flower is $9.65 per dry-weight ounce, and the tax rate for cannabis leaves is $2.87 per dry-weight ounce.
- Cannabis retailers must also pay a local business tax, which is typically based on the gross receipts of the business. The exact rate varies by jurisdiction, but it is generally in the range of 1-5%.
- Cannabis retailers are also subject to federal taxes, including the corporate income tax and the federal excise tax. However, due to the 280E provision of the Internal Revenue Code, cannabis retailers are not allowed to deduct their business expenses from their taxable income, which can significantly increase their federal tax burden.
- Finally, cannabis retailers may also be subject to various licensing fees and other regulatory costs, such as the cost of obtaining and renewing a cannabis business license, as well as any fees associated with the testing and labeling of cannabis products. These costs can vary significantly depending on the specifics of the business and the local regulatory environment.