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AB-1410 Taxation: marijuana cultivation tax.(2017-2018)

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Date Published: 04/04/2017 09:00 PM
AB1410:v98#DOCUMENT

Amended  IN  Assembly  April 04, 2017

CALIFORNIA LEGISLATURE— 2017–2018 REGULAR SESSION

Assembly Bill No. 1410


Introduced by Assembly Member Wood
(Principal coauthor: Senator McGuire)

February 17, 2017


An act to amend Sections 34012, 34014, and 34015 of, and to add Section 34012.5 to, the Revenue and Taxation Code, relating to taxation.


LEGISLATIVE COUNSEL'S DIGEST


AB 1410, as amended, Wood. Taxation: marijuana cultivation tax.
The Control, Regulate and Tax Adult Use of Marijuana Act, an initiative measure, measure approved as Proposition 64 at the November 8, 2016, statewide general election, on and after January 1, 2018, imposes a cultivation tax, which the State Board of Equalization administers and collects pursuant to the Fee Collection Procedures Law, on all harvested marijuana that enters the commercial market upon all persons required to be licensed to cultivate marijuana pursuant to that act and the Medical Cannabis Regulation and Safety Act. The Control, Regulate and Tax Adult Use of Marijuana Act requires, on or before the last day of the month following each quarterly period, a tax return for the cultivation tax for the preceding quarterly period to be filed with the State Board of Equalization by each person required to be licensed for cultivation under that act and the Medical Cannabis Regulation and Safety Act. Under existing law, a violation of provisions relating to the cultivation tax is a crime unless otherwise specified.
This bill would, bill, at the time that any payment or consideration is tendered to the taxpayer, or at the time of completion of all quality assurance, inspection, and testing or when that quality assurance, inspection, and testing should have been completed, whichever is earlier, would instead require authorize, if requested by the taxpayer, a person required to be licensed as a distributor under the act and the Medical Cannabis Regulation and Safety Act to collect the cultivation tax from the taxpayer and give to the taxpayer a receipt in the manner and form prescribed by the board, except as specified. By expanding the application of the Fee Collection Procedures Law, which imposes criminal penalties for various acts, this bill would impose a state-mandated local program. This bill would provide that the tax required to be collected by the that the person required to be licensed as a distributor, distributor collected, and any amount unreturned to the taxpayer which is not a tax but was collected from the taxpayer under the representation by the person required to be licensed as a distributor that it was tax, constitute debts owed to the state by the person required to be licensed as a distributor.
This bill would require the person required to be licensed as a distributor who collects the tax pursuant to these provisions to file the tax return instead of the person required to be licensed for cultivation, except as specified. The bill would also require all persons required to be licensed as a distributors who are required authorized to collect the tax to obtain a separate permit at no charge. The bill would provide that any person required to obtain this permit who engages in business as a distributor without a permit or after a permit has been canceled, suspended, or revoked, and each officer of any corporation that so engages in business, is guilty of a misdemeanor. By creating a new crime, this bill would impose a state-mandated local program.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
The Control, Regulate and Tax Adult Use of Marijuana Act authorizes the Legislature to amend the act to further the purposes and intent of the act with a 2/3 2/3 vote of the membership of both houses of the Legislature, except as provided.
This bill would declare that its provisions further specified purposes and intent of the Control, Regulate and Tax Adult Use of Marijuana Act.
Vote: 2/3   Appropriation: NO   Fiscal Committee: YES   Local Program: YES  

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


SECTION 1.

 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 marijuana that enters the commercial market upon all persons required to be licensed to cultivate marijuana pursuant to Chapter 3.5 (commencing with Section 19300) of Division 8 of the Business and Professions Code or Division 10 (commencing with Section 26000) of the Business and Professions Code. The tax shall be due after the marijuana is harvested.
(1) The tax for marijuana flowers shall be nine dollars and twenty-five cents ($9.25) per dry-weight ounce.
(2) The tax for marijuana leaves shall be set at two dollars and seventy-five cents ($2.75) per dry-weight ounce.
(b) The board may adjust the tax rate for marijuana leaves annually to reflect fluctuations in the relative price of marijuana flowers to marijuana leaves.
(c) The board may from time to time establish other categories of harvested marijuana, categories for unprocessed or frozen marijuana or immature plants, or marijuana that is shipped directly to manufacturers. These categories shall be taxed at their relative value compared with marijuana flowers.
(d) The board 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 marijuana is packaged.
(e) The tax stamps and product bags shall be of the designs, specifications specifications, and denominations as may be prescribed by the board, and may be purchased by any licensee under Chapter 3.5 (commencing with Section 19300) of Division 8 of the Business and Professions Code or under Division 10 (commencing with Section 26000) of the Business and Professions Code.
(f) Subsequent to the establishment of a tax stamp program, the board may by regulation provide that no marijuana may 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 26170 of the Business and Professions Code.
(h) A person required to be licensed to cultivate marijuana pursuant to Chapter 3.5 (commencing with Section 19300) of Division 8 of the Business and Professions Code or Division 10 (commencing with Section 26000) of the Business and Professions Code shall be responsible for payment of the tax pursuant to regulations adopted by the board. The liability to pay the tax imposed by this section is not extinguished until the tax has been paid to this state, except that a receipt from a person required to be licensed as a distributor pursuant to Chapter 3.5 (commencing with Section 19300) of Division 8 of the Business and Professions Code or Division 10 (commencing with Section 26000) of the Business and Professions Code given to the taxpayer pursuant to Section 34012.5 is sufficient to relieve the taxpayer from further liability for the tax to which the receipt refers. No marijuana may be sold unless the tax has been paid as provided in this part.
(i) All marijuana removed from a cultivator’s premises, except for plant waste, shall be presumed to be sold and thereby taxable under this section.
(j) The tax imposed by this section shall be imposed on all marijuana cultivated in the state pursuant to rules and regulations promulgated by the board, but shall not apply to marijuana 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.
(k) Beginning January 1, 2020, the rates set forth in subdivisions (a), (b), and (c) shall be adjusted by the board annually thereafter for inflation.

SEC. 2.

 Section 34012.5 is added to the Revenue and Taxation Code, to read:

34012.5.
 (a) At the time that any payment or consideration is tendered to the taxpayer, or at the time of completion of all quality assurance, inspection, and testing as described in Section 19326 or 26110 of the Business and Professions Code or when that quality assurance, inspection, and testing should have been completed, whichever is earlier, a person required to be licensed as a distributor shall may, if requested by the taxpayer, collect the tax imposed by Section 34012 from the taxpayer and give to the taxpayer a receipt, in the manner and form prescribed by the board. This subdivision shall not apply where a taxpayer is not required to and does not send the harvested marijuana to a person required to be licensed as a distributor. This subdivision does not affect the authority of a taxpayer to remit the tax imposed by Section 34012 to the board by filing a return pursuant to Section 34015. This subdivision does not require a person required to be licensed as a distributor to collect tax under this section.
(b) The tax required to be collected by the that a person required to be licensed as a distributor collected pursuant to subdivision (a) and any amount unreturned to the taxpayer which is not a tax but was collected from the taxpayer under the representation by the person required to be licensed as a distributor that it was a tax constitutes debts owed by the person required to be licensed as a distributor to this state. This section does not impose any obligation upon a person required to be licensed as a distributor to take any legal action to enforce the collection of the tax imposed by Section 34012.
(c) The tax required to be collected by the a person required to be licensed as a distributor from the taxpayer pursuant to this section shall be displayed separately from the price or value of the harvested marijuana or other price or value displayed on any proof of sales or documentation of a transaction.
(d) For purposes of this section, “a person required to be licensed as a distributor” means a person required to be licensed as a distributor pursuant to Chapter 3.5 (commencing with Section 19300) of Division 8 of the Business and Professions Code or Division 10 (commencing with Section 26000) of the Business and Professions Code.

SEC. 3.

 Section 34014 of the Revenue and Taxation Code is amended to read:

34014.
 (a) (1) All persons required to be licensed involved in the cultivation and retail sale of marijuana or marijuana products must obtain a separate permit from the board pursuant to regulations adopted by the board. No fee shall be charged to any person for issuance of the permit. Any person required to obtain a permit who engages in business as a cultivator, dispensary, retailer, microbusiness microbusiness, or nonprofit pursuant to Chapter 3.5 (commencing with Section 19300) of Division 8 of the Business and Professions Code or Division 10 (commencing with Section 26000) of the Business and Professions Code without a permit or after a permit has been canceled, suspended, or revoked, and each officer of any corporation which so engages in business, is guilty of a misdemeanor.
(2) All persons required to be licensed as distributors pursuant to Chapter 3.5 (commencing with Section 19300) of Division 8 of the Business and Professions Code or Division 10 (commencing with Section 26000) of the Business and Professions Code and who are required authorized by Section 34012.5 to collect the tax imposed by Section 34012 shall obtain a separate permit from the board pursuant to regulations adopted by the board. No fee shall be charged to any person for issuance of the permit required pursuant to this paragraph. Any person required to obtain a permit pursuant to this paragraph who engages in business as a distributor required to be licensed pursuant to Chapter 3.5 (commencing with Section 19300) of Division 8 of the Business and Professions Code or Division 10 (commencing with Section 26000) of the Business and Professions Code without a permit or after a permit has been canceled, suspended, or revoked, and each officer of any corporation that so engages in business, is guilty of a misdemeanor.
(b) The board may require every licensed dispensary, cultivator, microbusiness, nonprofit, or other person required to be licensed, to provide security to cover the liability for taxes imposed by state law on marijuana produced or received by the cultivator, microbusiness, nonprofit, or other person required to be licensed in accordance with procedures to be established by the board. Notwithstanding anything herein to the contrary, the board may waive any security requirement it imposes for good cause, as determined by the board. “Good cause” includes, but is not limited to, the inability of a cultivator, microbusiness, nonprofit, or other person required to be licensed to obtain security due to a lack of service providers or the policies of service providers that prohibit service to a marijuana business. A person may not commence or continue any business or operation relating to marijuana cultivation until any surety required by the board with respect to the business or operation has been properly prepared, executed executed, and submitted under this part.
(c) In fixing the amount of any security required by the board, the board shall give consideration to the financial hardship that may be imposed on licensees as a result of any shortage of available surety providers.

SEC. 4.

 Section 34015 of the Revenue and Taxation Code is amended to read:

34015.
 (a) (1) The marijuana excise tax and cultivation tax imposed by this part is due and payable to the board quarterly on or before the last day of the month following each quarterly period of three months. On or before the last day of the month following each quarterly period, a return for the preceding quarterly period shall be filed with the board by each person required to be licensed for cultivation or retail sale under Chapter 3.5 (commencing with Section 19300) of Division 8 of the Business and Professions Code or Division 10 (commencing with Section 26000) of the Business and Professions Code using electronic media. Returns shall be authenticated in a form or pursuant to methods as may be prescribed by the board. If the cultivation tax is paid by stamp pursuant to subdivision (d) of Section 34012 the board may by regulation determine when and how the tax shall be paid.
(2) Notwithstanding paragraph (1), a person required to be licensed for cultivation under Chapter 3.5 (commencing with Section 19300) of Division 8 of the Business and Professions Code or Division 10 (commencing with Section 26000) of the Business and Professions Code shall not be required to file the return described in paragraph (1) if the cultivation tax imposed by Section 34012 has been collected by a person required to be licensed as a distributor pursuant to Chapter 3.5 (commencing with Section 19300) of Division 8 of the Business and Professions Code or Division 10 (commencing with Section 26000) of the Business and Professions Code pursuant to Section 34012.5. In that case, the person required to be licensed as a distributor pursuant to Chapter 3.5 (commencing with Section 19300) of Division 8 of the Business and Professions Code or Division 10 (commencing with Section 26000) of the Business and Professions Code who has collected the tax pursuant to Section 34012.5 shall file the return described in paragraph (1). The board shall authenticate the return in a form or pursuant to methods as may be prescribed by the board.
(b) The board may require every person engaged in the cultivation, distribution, or retail sale of marijuana and marijuana products required to be licensed pursuant to Chapter 3.5 (commencing with Section 19300) of Division 8 of the Business and Professions Code or Division 10 (commencing with Section 26000) of the Business and Professions Code to file, on or before the 25th day of each month, a report using electronic media respecting the person’s inventory, purchases, and sales during the preceding month and any other information as the board may require to carry out the purposes of this part. Reports shall be authenticated in a form or pursuant to methods as may be prescribed by the board.

SEC. 5.

 No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII B of the California Constitution.

SEC. 6.

 The Legislature finds and declares that this act furthers the purposes and intent of the Control, Regulate and Tax Adult Use of Marijuana Act by enhancing the efficiency of the administration and collection of the cultivation tax imposed by Section 34012 of the Revenue and Taxation Code.