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SB-512 Cannabis: taxation: gross receipts. (2023-2024)



Current Version: 05/03/23 - Amended Senate

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SB512:v97#DOCUMENT

Amended  IN  Senate  May 03, 2023
Amended  IN  Senate  March 20, 2023

CALIFORNIA LEGISLATURE— 2023–2024 REGULAR SESSION

Senate Bill
No. 512

Introduced by Senator Bradford

February 14, 2023

An act to add Sections 16005 and 16106 to the Business and Professions Code, to amend Section 37101 of the Government Code, and to amend Sections 6011, 6012, 34011.2, and 34021 and 34011.2 of the Revenue and Taxation Code, relating to cannabis, to take effect immediately, tax levy.


LEGISLATIVE COUNSEL'S DIGEST


SB 512, as amended, Bradford. Cannabis: taxation: gross receipts.
The Control, Regulate and Tax Adult Use of Marijuana Act (AUMA), an initiative measure, 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. 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.
Existing law, the Cannabis Tax Law, imposes an excise tax upon purchasers of cannabis or cannabis products sold in this state at the rate of 15% of the gross receipts of any retail sale by a cannabis retailer, and prior to July 1, 2022, a cultivation tax on all harvested cannabis that entered the commercial market, as specified. Existing law provides that taxes imposed under the Cannabis Tax Law are in addition to any other tax imposed by a city or county. Existing law defines “gross receipts” for purposes of the Cannabis Tax Law as it is defined under the Sales and Use Tax Law.
Existing sales and use tax laws impose taxes on retailers measured by gross receipts from the sale of tangible personal property sold at retail in this state, or on the storage, use, or other consumption in this state of tangible personal property purchased from a retailer for storage, use, or other consumption in this state, measured by sales price. The Sales and Use Tax Law defines the term “gross receipts” for these purposes to mean the total amount of the sale or lease or rental price of the retail sales of retailers, valued in money, whether received in money or otherwise, as specified, unless an exclusion applies. The Sales and Use Tax Law defines the term “sales price” for these purposes to mean the total amount for which tangible personal property is sold or leased or rented, valued in money, whether received in money or otherwise, as specified, unless an exclusion applies.
This bill, beginning January 1, 2024, would exclude from the term terms “gross receipts” and “sales price” under the Sales and Use Tax Law the amount of the cannabis excise tax imposed under the Cannabis Tax Law and the amount of any tax imposed by a city or county on the privilege of engaging in commercial cannabis activity, as specified. The bill, beginning January 1, 2024, bill would also prohibit a city or county from including in the definition of gross receipts, for purposes of any local tax or fee on the privilege of engaging in commercial cannabis activity, as specified, a licensed cannabis retailer the amount of any cannabis excise tax imposed under the Cannabis Tax Law or any sales and use taxes. By imposing new requirements on local governments with respect to their taxes and fees, the bill would impose a state-mandated local program.
The bill would include findings that changes proposed by this bill address a matter of statewide concern rather than a municipal affair and, therefore, apply to all cities, including charter cities.
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, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to the statutory provisions noted above.
AUMA authorizes legislative amendment of its provisions with a 2/3 vote of both houses, without submission to the voters, to further its purposes and intent.
This bill would declare that its provisions further the purposes and intent of AUMA.
This bill would take effect immediately as a tax levy.
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 16005 is added to the Business and Professions Code, to read:

16005.
 (a) A city shall not include in the definition of gross receipts, for purposes of any local tax or fee imposed by the city on a cannabis retailer licensed under Division 10 (commencing with Section 26000), the amount of any cannabis excise tax imposed under Section 34011.2 of, or any sales and use taxes imposed under Part 1 (commencing with Section 6001), Part 1.5 (commencing with Section 7200), or Part 1.6 (commencing with Section 7251) of Division 2 of, the Revenue and Taxation Code, or Section 35 of Article XIII of the California Constitution.
(b) For purposes of this section, “city” includes a charter city and a city and county.

SEC. 2.

 Section 16106 is added to the Business and Professions Code, to read:

16106.
 A county shall not include in the definition of gross receipts, for purposes of any local tax or fee imposed by the county on a cannabis retailer licensed under Division 10 (commencing with Section 26000), the amount of any cannabis excise tax imposed under Section 34011.2 of, or any sales and use taxes imposed under Part 1 (commencing with Section 6001), Part 1.5 (commencing with Section 7200), or Part 1.6 (commencing with Section 7251) of Division 2 of, the Revenue and Taxation Code, or Section 35 of Article XIII of the California Constitution.

SEC. 3.

 Section 37101 of the Government Code is amended to read:

37101.
 (a) The legislative body may license, for revenue and regulation, and fix the license tax upon, every kind of lawful business transacted in the city, including shows, exhibitions, and games. It may provide for collection of the license tax by suit or otherwise. If the legislative body levies a sales tax under the authority of this section, it may impose a complementary tax at the same rate upon use or other consumption of tangible personal property.
If the legislative body imposes a sales or use tax, it shall do so in the same manner and use the same tax base as prescribed in Part 1.5 (commencing with Section 7200) of Division 2 of the Revenue and Taxation Code.
(b) Any legislative body, including the legislative body of a charter city, that levies a license tax pursuant to subdivision (a) upon a business operating both within and outside the legislative body’s taxing jurisdiction, shall levy the tax so that the measure of tax fairly reflects that proportion of the taxed activity actually carried on within the taxing jurisdiction.
(c) No license tax levied pursuant to subdivision (a) that is measured by the licensee’s income or gross receipts, whether levied by a charter or general law city, shall apply to any nonprofit organization that is exempted from taxes by Chapter 4 (commencing with Section 23701) of Part 11 of Division 2 of the Revenue and Taxation Code or Subchapter F (commencing with Section 501) of Chapter 1 of Subtitle A of the Internal Revenue Code of 1986, or the successor of either, or to any minister, clergyman, Christian Science practitioner, rabbi, or priest of any religious organization that has been granted an exemption from federal income tax by the United States Commissioner of Internal Revenue as an organization described in Section 501(c)(3) of the Internal Revenue Code or a successor to that section.
(d) A county shall not include in the definition of gross receipts, for purposes of any local tax or fee imposed by the county on a cannabis retailer licensed under Division 10 (commencing with Section 26000) of the Business and Professions Code, the amount of any cannabis excise tax imposed under Section 34011.2 of, or any sales and use taxes imposed under Part 1 (commencing with Section 6001), Part 1.5 (commencing with Section 7200), or Part 1.6 (commencing with Section 7251) of, Division 2 of the Revenue and Taxation Code, or Section 35 of Article XIII of the California Constitution.

SEC. 4.

 Section 6011 of the Revenue and Taxation Code is amended to read:

6011.
 (a) “Sales price” means the total amount for which tangible personal property is sold or leased or rented, as the case may be, valued in money, whether paid in money or otherwise, without any deduction on account of any of the following:
(1) The cost of the property sold.
(2) The cost of materials used, labor or service cost, interest charged, losses, or any other expenses.
(3) The cost of transportation of the property, except as excluded by other provisions of this section.
(b) The total amount for which the property is sold or leased or rented includes all of the following:
(1) Any services that are a part of the sale.
(2) Any amount for which credit is given to the purchaser by the seller.
(3) The amount of any tax imposed by the United States upon producers and importers of gasoline and the amount of any tax imposed pursuant to Part 2 (commencing with Section 7301) of this division.
(c) “Sales price” does not include any of the following:
(1) Cash discounts allowed and taken on sales.
(2) The amount charged for property returned by customers when that entire amount is refunded either in cash or credit, but this exclusion shall not apply in any instance when the customer, in order to obtain the refund, is required to purchase other property at a price greater than the amount charged for the property that is returned. For the purpose of this section, refund or credit of the entire amount shall be deemed to be given when the purchase price less rehandling and restocking costs are refunded or credited to the customer. The amount withheld for rehandling and restocking costs may be a percentage of the sales price determined by the average cost of rehandling and restocking returned merchandise during the previous accounting cycle.
(3) The amount charged for labor or services rendered in installing or applying the property sold.
(4) (A) The amount of any tax (not including, however, any manufacturers’ or importers’ excise tax, except as provided in subparagraph (B)) imposed by the United States upon or with respect to retail sales whether imposed upon the retailer or the consumer.
(B) The amount of manufacturers’ or importers’ excise tax imposed pursuant to Section 4081 or 4091 of the Internal Revenue Code for which the purchaser certifies that he or she the purchaser is entitled to either a direct refund or credit against his or her the purchaser’s income tax for the federal excise tax paid or for which the purchaser issues a certificate pursuant to Section 6245.5.
(5) The amount of any tax imposed by any city, county, city and county, or rapid transit district within the State of California upon or with respect to retail sales of tangible personal property, measured by a stated percentage of sales price or gross receipts, whether imposed upon the retailer or the consumer.
(6) The amount of any tax imposed by any city, county, city and county, or rapid transit district within the State of California with respect to the storage, use or other consumption in that city, county, city and county, or rapid transit district of tangible personal property measured by a stated percentage of sales price or purchase price, whether the tax is imposed upon the retailer or the consumer.
(7) Separately stated charges for transportation from the retailer’s place of business or other point from which shipment is made directly to the purchaser, but the exclusion shall not exceed a reasonable charge for transportation by facilities of the retailer or the cost to the retailer of transportation by other than facilities of the retailer. However, if the transportation is by facilities of the retailer, or the property is sold for a delivered price, this exclusion shall be applicable solely with respect to transportation which occurs after the purchase of the property is made.
(8) Charges for transporting landfill from an excavation site to a site specified by the purchaser, either if the charge is separately stated and does not exceed a reasonable charge or if the entire consideration consists of payment for transportation.
(9) The amount of any motor vehicle, mobilehome, or commercial coach fee or tax imposed by and paid the State of California that has been added to or is measured by a stated percentage of the sales or purchase price of a motor vehicle, mobilehome, or commercial coach.
(10) (A) The amount charged for intangible personal property transferred with tangible personal property in any technology transfer agreement, if the technology transfer agreement separately states a reasonable price for the tangible personal property.
(B) If the technology transfer agreement does not separately state a price for the tangible personal property, and the tangible personal property or like tangible personal property has been previously sold or leased, or offered for sale or lease, to third parties at a separate price, the price at which the tangible personal property was sold, leased, or offered to third parties shall be used to establish the retail fair market value of the tangible personal property subject to tax. The remaining amount charged under the technology transfer agreement is for the intangible personal property transferred.
(C) If the technology transfer agreement does not separately state a price for the tangible personal property, and the tangible personal property or like tangible personal property has not been previously sold or leased, or offered for sale or lease, to third parties at a separate price, the retail fair market value shall be equal to 200 percent of the cost of materials and labor used to produce the tangible personal property subject to tax. The remaining amount charged under the technology transfer agreement is for the intangible personal property transferred.
(D) For purposes of this paragraph, “technology transfer agreement” means any agreement under which a person who holds a patent or copyright interest assigns or licenses to another person the right to make and sell a product or to use a process that is subject to the patent or copyright interest.
(11) The amount of any tax imposed upon diesel fuel pursuant to Part 31 (commencing with Section 60001).
(12) (A) The amount of tax imposed by any Indian tribe within the State of California with respect to a retail sale of tangible personal property measured by a stated percentage of the sales or purchase price, whether the tax is imposed upon the retailer or the consumer.
(B) The exclusion authorized by subparagraph (A) shall only apply to those retailers who are in substantial compliance with this part.
(13) Beginning January 1, 2024, the amount of any tax or fee imposed by a city, county, or city and county on the privilege of cultivating, manufacturing, producing, processing, preparing, storing, providing, donating, selling, distributing, or delivering cannabis or cannabis products by a licensee operating under Division 10 (commencing with Section 26000) of the Business and Professions Code.
(14) Beginning January 1, 2024, the amount of any cannabis excise tax imposed under Section 34011.2.

SECTION 1.SEC. 5.

 Section 6012 of the Revenue and Taxation Code is amended to read:

6012.
 (a) “Gross receipts” mean the total amount of the sale or lease or rental price, as the case may be, of the retail sales of retailers, valued in money, whether received in money or otherwise, without any deduction on account of any of the following:
(1) The cost of the property sold. However, in accordance with any rules and regulations as the department may prescribe, a deduction may be taken if the retailer has purchased property for some other purpose than resale, has reimbursed its vendor for tax which the vendor is required to pay to the state or has paid the use tax with respect to the property, and has resold the property prior to making any use of the property other than retention, demonstration, or display while holding it for sale in the regular course of business. If that deduction is taken by the retailer, no refund or credit will be allowed to its vendor with respect to the sale of the property.
(2) The cost of the materials used, labor or service cost, interest paid, losses, or any other expense.
(3) The cost of transportation of the property, except as excluded by other provisions of this section.
(4) The amount of any tax imposed by the United States upon producers and importers of gasoline and the amount of any tax imposed pursuant to Part 2 (commencing with Section 7301) of this division.
(b) The total amount of the sale or lease or rental price includes all of the following:
(1) Any services that are a part of the sale.
(2) All receipts, cash, credits credits, and property of any kind.
(3) Any amount for which credit is allowed by the seller to the purchaser.
(c) “Gross receipts” do not include any of the following:
(1) Cash discounts allowed and taken on sales.
(2) Sale price of property returned by customers when that entire amount is refunded either in cash or credit, but this exclusion shall not apply in any instance when the customer, in order to obtain the refund, is required to purchase other property at a price greater than the amount charged for the property that is returned. For the purpose of this section, refund or credit of the entire amount shall be deemed to be given when the purchase price less rehandling and restocking costs are refunded or credited to the customer. The amount withheld for rehandling and restocking costs may be a percentage of the sales price determined by the average cost of rehandling and restocking returned merchandise during the previous accounting cycle.
(3) The price received for labor or services used in installing or applying the property sold.
(4) (A) The amount of any tax (not including, however, any manufacturers’ or importers’ excise tax, except as provided in subparagraph (B)) imposed by the United States upon or with respect to retail sales whether imposed upon the retailer or the consumer.
(B) The amount of manufacturers’ or importers’ excise tax imposed pursuant to Section 4081 of the Internal Revenue Code for which the purchaser certifies that the purchaser is entitled to either a direct refund or credit against the purchaser’s income tax for the federal excise tax paid or for which the purchaser issues a certificate pursuant to Section 6245.5.
(5) The amount of any tax imposed by any city, county, city and county, or rapid transit district within the State of California upon or with respect to retail sales of tangible personal property measured by a stated percentage of sales price or gross receipts whether imposed upon the retailer or the consumer.
(6) The amount of any tax imposed by any city, county, city and county, or rapid transit district within the State of California with respect to the storage, use, or other consumption in that city, county, city and county, or rapid transit district of tangible personal property measured by a stated percentage of sales price or purchase price, whether the tax is imposed upon the retailer or the consumer.
(7) Separately stated charges for transportation from the retailer’s place of business or other point from which shipment is made directly to the purchaser, but the exclusion shall not exceed a reasonable charge for transportation by facilities of the retailer or the cost to the retailer of transportation by other than facilities of the retailer. However, if the transportation is by facilities of the retailer, or the property is sold for a delivered price, this exclusion shall be applicable solely with respect to transportation which occurs after the sale of the property is made to the purchaser.
(8) Charges for transporting landfill from an excavation site to a site specified by the purchaser, either if the charge is separately stated and does not exceed a reasonable charge or if the entire consideration consists of payment for transportation.
(9) The amount of any motor vehicle, mobilehome, or commercial coach fee or tax imposed by and paid to the State of California that has been added to or is measured by a stated percentage of the sales or purchase price of a motor vehicle, mobilehome, or commercial coach.
(10) (A) The amount charged for intangible personal property transferred with tangible personal property in any technology transfer agreement, if the technology transfer agreement separately states a reasonable price for the tangible personal property.
(B) If the technology transfer agreement does not separately state a price for the tangible personal property, and the tangible personal property or like tangible personal property has been previously sold or leased, or offered for sale or lease, to third parties at a separate price, the price at which the tangible personal property was sold, leased, or offered to third parties shall be used to establish the retail fair market value of the tangible personal property subject to tax. The remaining amount charged under the technology transfer agreement is for the intangible personal property transferred.
(C) If the technology transfer agreement does not separately state a price for the tangible personal property, and the tangible personal property or like tangible personal property has not been previously sold or leased, or offered for sale or lease, to third parties at a separate price, the retail fair market value shall be equal to 200 percent of the cost of materials and labor used to produce the tangible personal property subject to tax. The remaining amount charged under the technology transfer agreement is for the intangible personal property transferred.
(D) For purposes of this paragraph, “technology transfer agreement” means any agreement under which a person who holds a patent or copyright interest assigns or licenses to another person the right to make and sell a product or to use a process that is subject to the patent or copyright interest.
(11) The amount of any tax imposed upon diesel fuel pursuant to Part 31 (commencing with Section 60001).
(12) (A) The amount of tax imposed by any Indian tribe within the State of California with respect to a retail sale of tangible personal property measured by a stated percentage of the sales or purchase price, whether the tax is imposed upon the retailer or the consumer.
(B) The exclusion authorized by subparagraph (A) shall only apply to those retailers who are in substantial compliance with this part.
(13) Beginning January 1, 2024, the amount of any tax or fee imposed by a city, county, or city and county on the privilege of cultivating, manufacturing, producing, processing, preparing, storing, providing, donating, selling, distributing, or delivering cannabis or cannabis products by a licensee operating under Division 10 (commencing with Section 26000) of the Business and Professions Code.
(14) Beginning January 1, 2024, the amount of any cannabis excise tax imposed under Section 34011.2.
(d) For purposes of the sales tax, if the retailers establish to the satisfaction of the board that the sales tax has been added to the total amount of the sale price and has not been absorbed by them, the total amount of the sale price shall be deemed to be the amount received exclusive of the tax imposed. Section 1656.1 of the Civil Code shall apply in determining whether or not the retailers have absorbed the sales tax.

SEC. 2.SEC. 6.

 Section 34011.2 of the Revenue and Taxation Code is amended to read:

34011.2.
 (a) (1) Effective on and after January 1, 2023, a cannabis excise tax shall be imposed upon purchasers of cannabis or cannabis products sold in this state at 15 percent of the gross receipts of any retail sale of cannabis or cannabis products by a cannabis retailer.
(2) For the 2025–26 fiscal year and every two years thereafter, the department, in consultation with the Department of Finance, shall on or before May 1 of the fiscal year immediately preceding the applicable fiscal year, adjust the cannabis excise tax rate upon purchasers of cannabis or cannabis products imposed in paragraph (1) by the additional percentage of the gross receipts of any retail sale by a cannabis retailer that the department estimates will generate an amount of revenue equivalent to the amount that would have been collected in the previous fiscal year pursuant to the weight-based cultivation tax imposed under Section 34012 as it read on the date before the effective date of the act adding this section. In no case shall the cannabis excise tax exceed 19 percent of the gross receipts of retail sale. The department shall round the rate calculated under this subdivision to the nearest one-quarter of 1 percent. The adjusted rate shall become operative the following July 1.
(3) On or before May 1, 2025, and each May 1 every two years thereafter, the department, in consultation with the Department of Finance, shall estimate the amount of revenue that would have been collected in the previous fiscal year pursuant to the weight-based cultivation tax imposed under Section 34012 as it read on the date before the effective date of the act adding this section. The department shall estimate this amount by projecting the revenue from weight-based cultivation taxes that would have been collected in the previous calendar year based on information available to the department, including, but not limited to, information in the track and trace system required pursuant to Chapter 6.5 (commencing with Section 26067) of Division 10 of the Business and Professions Code, or any implementing regulations, as a percentage of gross receipts from the retail sale of cannabis and cannabis products by cannabis retailers in the previous calendar year.
(b) A purchaser’s liability for the cannabis excise tax is not extinguished until the cannabis excise tax has been paid to this state, except that an invoice, receipt, or other document from a cannabis retailer given to the purchaser pursuant to this section is sufficient to relieve the purchaser from further liability for the tax to which the invoice, receipt, or other document refers.
(c) A cannabis retailer shall be responsible for collecting the cannabis excise tax from the purchaser and remitting that tax to the department in accordance with this division.
(d) The cannabis retailer shall provide each purchaser with an invoice, receipt, or other document that separately states the cannabis excise tax.
(e) The cannabis excise tax imposed by this section shall be in addition to the sales and use tax imposed by the state and local governments.
(f) Before January 1, 2024, gross receipts from the sale of cannabis or cannabis products for purposes of assessing the sales and use taxes under Part 1 (commencing with Section 6001) shall include the tax levied pursuant to this section.
(g) Cannabis or cannabis products shall not be sold to a purchaser unless the cannabis excise tax imposed by this section has been paid by the purchaser at the time of sale.
(h) This section shall not be construed to impose a cannabis excise tax upon medicinal cannabis, or medicinal cannabis product, donated for no consideration to a medicinal cannabis patient pursuant to Section 26071 of the Business and Professions Code.
(i) (1) This section shall not be construed to impose a cannabis excise tax upon cannabis or cannabis products designated as a trade sample pursuant to Section 26153.1 of the Business and Professions Code.
(2) A person licensed under Division 10 (commencing with Section 26000) of the Business and Professions Code that sells cannabis or cannabis products designated as a trade sample pursuant to Section 26153.1 of the Business and Professions Code shall be liable for the cannabis excise tax imposed by this section as if the person were a cannabis retailer at the time of sale.
(j) This section shall become operative on January 1, 2023.

SEC. 3.Section 34021 of the Revenue and Taxation Code is amended to read:
34021.

(a)The taxes imposed by this part shall be in addition to any other tax imposed by a city, county, or city and county.

(b)Notwithstanding any other law, beginning January 1, 2024, a city, county, or city and county shall not include in the definition of gross receipts, for purposes of a local tax or fee imposed by a city, county, or city and county on the privilege of cultivating, manufacturing, producing, processing, preparing, storing, providing, donating, selling, distributing, or delivering cannabis or cannabis products by a licensee operating under Division 10 (commencing with Section 26000) of the Business and Professions Code, the amount of any cannabis excise tax imposed under Section 34011.2 or any sales and use taxes imposed under Part 1 (commencing with Section 6001).

(c)The Legislature finds and declares that this section addresses a matter of statewide concern rather than a municipal affair as that term is used in Section 5 of Article XI of the California Constitution. Therefore, this section applies to all cities, including charter cities.

SEC. 4.SEC. 7.

 If the Commission on State Mandates determines that this act contains costs mandated by the state, reimbursement to local agencies and school districts for those costs shall be made pursuant to Part 7 (commencing with Section 17500) of Division 4 of Title 2 of the Government Code.

SEC. 5.SEC. 8.

 The Legislature finds and declares that this act furthers the purposes and intent of the Control, Regulate and Tax Adult Use of Marijuana Act.

SEC. 6.SEC. 9.

 This act provides for a tax levy within the meaning of Article IV of the California Constitution and shall go into immediate effect.