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SB-475 Cannabis: trade samples.(2019-2020)



Current Version: 05/08/19 - Amended Senate         Compare Versions information image


SB475:v95#DOCUMENT

Amended  IN  Senate  May 08, 2019
Amended  IN  Senate  April 29, 2019
Amended  IN  Senate  April 04, 2019
Amended  IN  Senate  March 26, 2019

CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Senate Bill
No. 475


Introduced by Senator Skinner
(Coauthor: Senator Bradford)

February 21, 2019


An act to add Section 26153.1 to the Business and Professions Code, and to amend Section 34012 of, and to add Section 34012.2 to, the Revenue and Taxation Code, relating to cannabis.


LEGISLATIVE COUNSEL'S DIGEST


SB 475, as amended, Skinner. Cannabis: trade samples: cultivation tax: exemption. samples.
The Control, Regulate and Tax Adult Use of Marijuana Act of 2016 (AUMA), an initiative measure approved as Proposition 64 at the November 8, 2016, statewide general election, authorizes a person who obtains a state license under AUMA to engage in commercial adult-use cannabis activity pursuant to that license and applicable local ordinances. AUMA authorizes the Legislature to amend the act to further the purposes and intent of the act with a 2/3 vote of the membership of both houses of the Legislature, except as provided. The Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA), among other things, consolidates the licensure and regulation of commercial medicinal and adult-use cannabis activities. MAUCRSA gives the Bureau of Cannabis Control in the Department of Consumer Affairs the power, duty, purpose, responsibility, and jurisdiction to regulate commercial cannabis activity in the state as provided by the act. AUMA also prohibits a licensee from giving away any amount of cannabis or cannabis product as part of a business promotion or other commercial activity.
This bill would allow a licensee to designate cannabis or a cannabis product as a trade sample at any time while the cannabis or cannabis product is in the possession of the licensee and would impose specific requirements on the licensee making the designation. The bill would prohibit the sale or donation of cannabis or a cannabis product that is designated a trade sample, but would allow those trade samples to be given for no consideration to an employee of the licensee that designated the trade sample or to another licensee. The bill would require a trade sample to be given only for specified purposes. The bill would require trade samples given to another licensee to be recorded in the track and trace system and would require a licensee to maintain records of cannabis trade samples given to employees. The bill would prohibit an employee of a licensee from possessing or transporting trade samples in excess of specified amounts. The bill would require the bureau to establish by regulation a definition of trade sample. The bill would allow the bureau to establish by regulation a limit on the quantity of cannabis and cannabis goods designated by a licensee as a trade sample, as specified.
MAUCRSA provides that cannabis batches are subject to quality assurance and testing prior to sale at a retailer, microbusiness, or specified nonprofit, except as provided.
This bill would require cannabis or cannabis products designated as a trade sample to be subject to quality assurance and testing.

AUMA, and as further amended by statute, imposes a cultivation tax on all harvested cannabis that enters the commercial market upon all cultivators and requires a distributor or a manufacturer to collect that tax from a cultivator, as specified. Existing law requires the California Department of Tax and Fee Administration to administer that tax.

This bill, on and after January 1, 2020, would prohibit the cultivation tax from being imposed on cannabis that is designated a trade sample by the cultivator who harvested the cannabis or by a cannabis licensee who purchased the cannabis directly from that cultivator. The bill would require a distributor or manufacturer to refund the cultivator for any cultivation tax collected on cannabis exempt from the tax pursuant to the above-described provision.

Vote: 2/3   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

The people of the State of California do enact as follows:


SECTION 1.

 Section 26153.1 is added to the Business and Professions Code, to read:

26153.1.
 (a) A licensee may designate cannabis or a cannabis product as a trade sample at any time while the cannabis or cannabis product is in the possession of the licensee.
(b) Upon the designation of the cannabis or cannabis product as a trade sample, the licensee shall do both of the following:
(1) Record the associated quantity, product type, and unique identifiers of the cannabis or cannabis product into the track and trace program established pursuant to Section 26067.
(2) Label the cannabis or cannabis product with the following: “TRADE SAMPLE. NOT FOR RESALE OR DONATION.”
(c) Cannabis or cannabis products designated as a trade sample may be transported between licensees by an employee of a licensee.
(d) (1) Cannabis or cannabis products designated as a trade sample shall not be sold or donated by any licensee.
(2) Notwithstanding Section 26153, cannabis or cannabis products designated as a trade sample may be given for no consideration to an employee of the licensee that designated the trade sample or to another licensee, subject to all the following requirements:
(A) A trade sample shall only be given for the purposes of conducting research and development, education, or targeted advertising to licensees about new or existing cannabis or cannabis products.
(B) Cannabis or cannabis products designated as a trade sample given to another licensee shall be recorded in the track and trace system pursuant to Section 26067.
(C) A licensee shall maintain records of cannabis or cannabis products designated as a trade sample that are given to employees.
(D) An employee of the licensee shall not possess or transport trade samples in amounts exceeding the following:
(i) Twenty-eight and one-half grams of nonconcentrated cannabis.
(ii) Eight grams of concentrated cannabis, including concentrated cannabis contained in cannabis products.
(iii) Six immature cannabis plants.
(3) Cannabis or cannabis products may be consumed by the licensee or an employee of the licensee.
(4) Cannabis or cannabis products shall not be given to a retail customer.
(e) (1) The bureau shall establish by regulation a definition of trade sample.
(2) (A) The bureau may establish by regulation a limit on the quantity of cannabis and cannabis goods designated by a licensee as trade samples.
(B) The bureau shall not establish a limit pursuant to this paragraph that is less than 2 percent of each batch.
(f) Cannabis or cannabis products designated as a trade sample shall be subject to quality assurance and testing pursuant to Section 26110.

SEC. 2.Section 34012 of the Revenue and Taxation Code is amended to read:
34012.

(a)Effective January 1, 2018, there is hereby imposed a cultivation tax on all harvested cannabis that enters the commercial market upon all cultivators. The tax shall be due after the cannabis is harvested and enters the commercial market.

(1)The tax for cannabis flowers shall be nine dollars and twenty-five cents ($9.25) per dry-weight ounce.

(2)The tax for cannabis leaves shall be set at two dollars and seventy-five cents ($2.75) per dry-weight ounce.

(b)The department may adjust the tax rate for cannabis leaves annually to reflect fluctuations in the relative price of cannabis flowers to cannabis leaves.

(c)The department may from time to time establish other categories of harvested cannabis, categories for unprocessed or frozen cannabis or immature plants, or cannabis that is shipped directly to manufacturers. These categories shall be taxed at their relative value compared with cannabis flowers.

(d)The department may prescribe by regulation a method and manner for payment of the cultivation tax that utilizes tax stamps or state-issued product bags that indicate that all required tax has been paid on the product to which the tax stamp is affixed or in which the cannabis is packaged.

(e)The tax stamps and product bags shall be of the designs, specifications, and denominations as may be prescribed by the department and may be purchased by any licensee under Division 10 (commencing with Section 26000) of the Business and Professions Code.

(f)Subsequent to the establishment of a tax stamp program, the department may by regulation provide that cannabis shall not be removed from a licensed cultivation facility or transported on a public highway unless in a state-issued product bag bearing a tax stamp in the proper denomination.

(g)The tax stamps and product bags shall be capable of being read by a scanning or similar device and must be traceable utilizing the track and trace system pursuant to Section 26068 of the Business and Professions Code.

(h)Cultivators shall be responsible for payment of the tax pursuant to regulations adopted by the department. A cultivator’s liability for the tax is not extinguished until the tax has been paid to this state except that an invoice, receipt, or other document from a distributor or manufacturer given to the cultivator pursuant to paragraph (3) is sufficient to relieve the cultivator from further liability for the tax to which the invoice, receipt, or other document refers. Cannabis shall not be sold unless the tax has been paid as provided in this part.

(1)A distributor shall collect the cultivation tax from a cultivator on all harvested cannabis that enters the commercial market. This paragraph shall not apply where a cultivator is not required to send, and does not send, the harvested cannabis to a distributor.

(2)(A)A manufacturer shall collect the cultivation tax from a cultivator on the first sale or transfer of unprocessed cannabis by a cultivator to a manufacturer. The manufacturer shall remit the cultivation tax collected on the cannabis product sold or transferred to a distributor for quality assurance, inspection, and testing, as described in Section 26110 of the Business and Professions Code. This paragraph shall not apply where a distributor collects the cultivation tax from a cultivator pursuant to paragraph (1).

(B)Notwithstanding subparagraph (A), the department may prescribe a substitute method and manner for collection and remittance of the cultivation tax under this paragraph, including a method and manner for collection of the cultivation tax by a distributor.

(3)A distributor or manufacturer shall provide to the cultivator, and a distributor that collects the cultivation tax from a manufacturer pursuant to paragraph (2) shall provide to the manufacturer, an invoice, receipt, or other similar document that identifies the licensee receiving the product, the cultivator from which the product originates, including the associated unique identifier, the amount of cultivation tax, and any other information deemed necessary by the department. The department may authorize other forms of documentation under this paragraph.

(4)The department may adopt regulations prescribing procedures for the refund of cultivation tax collected on cannabis or a cannabis product that fails quality assurance, inspection, and testing as described in Section 26110 of the Business and Professions Code.

(i)All cannabis removed from a cultivator’s premises, except for plant waste, shall be presumed to be sold and thereby taxable under this section, except as otherwise exempt pursuant to Section 34012.2.

(j)The tax imposed by this section shall be imposed on all cannabis cultivated in the state pursuant to rules and regulations promulgated by the department, but shall not apply to cannabis cultivated for personal use under Section 11362.1 of the Health and Safety Code or cultivated by a qualified patient or primary caregiver in accordance with the Compassionate Use Act of 1996 (Section 11362.5 of the Health and Safety Code).

(k)Beginning January 1, 2020, the rates set forth in subdivisions (a), (b), and (c) shall be adjusted by the department annually thereafter for inflation.

(l)The Department of Food and Agriculture is not responsible for enforcing any provisions of the cultivation tax.

SEC. 3.Section 34012.2 is added to the Revenue and Taxation Code, to read:
34012.2.

(a)For purposes of this section, “cannabis licensee” means a person licensed to engage in commercial cannabis activity pursuant to Division 10 (commencing with Section 26000) of the Business and Professions Code.

(b)On and after January 1, 2020, the cultivation tax shall not be imposed on cannabis that is designated a trade sample pursuant to Section 26153.1 of the Business and Professions Code by the cultivator who harvested the cannabis or by a cannabis licensee who purchased the cannabis directly from that cultivator.

(c)A person who sells, or uses in a manner or for a purpose other than as a trade sample, cannabis exempt from the cultivation tax pursuant to subdivision (b) shall be liable for the cultivation tax imposed by Section 34012 as if the person were a cultivator of the cannabis at the time of sale.

(d)(1)A cultivator shall keep records of any cannabis or cannabis product designated as a trade sample that was exempt from the cultivation tax pursuant to subdivision (b).

(2)A distributor or manufacturer shall keep records of cannabis or cannabis products designated as trade samples that are exempt from the cultivation tax pursuant to subdivision (b) and shall communicate the amount of cannabis designated as a trade sample to the cultivator of the cannabis.

(3)A distributor or manufacturer shall refund the cultivator for any cultivation tax collected pursuant to Section 34012 on cannabis exempt from the cultivation tax pursuant to subdivision (b).