What happened to the reporting form?
Effective January 1, 2022, the tax rates on cultivation cannabis excise tax increased about four percent for the various categories of flowers, leaves, and fresh plants. This was reported previously this year to you (see “Some good and some bad news from the CDTFA for 2022.”)
Along with the change in rates, two additional adjustments are now acceptable for reporting: donated product and trade samples.
Donated product appears to be rather straightforward.
Trade samples has some refinement to be developed. The form now shows a column for trade samples which is an adjustment by type (flower, leave, whole plant) in arriving at taxable CULTIVATION tax.
What do “trade samples” usually look like in the marketplace? Aren’t they finished products like prepolls, etc.? Yes, that appears to be the only explanation: a seller of products provides samples to the buyer. Generally, these are samples from the distributor to the retailer.
So, there are two steps associated with reporting samples.
- On the Distro invoice, report any samples at a penny, as has been done now for a few years. This will result in de minimis (or effectively) no excise tax on the distro side.
- Take the weight of the sample sales noted in #1 and list this in the “samples” column on the cultivation part of the cannabis excise tax return.
A copy of an actual filing of the first quarter tax return is included (appropriate areas have been redacted). It is a copy of the online services filing record: Cannabis Return, provided by the State of California, California Department of Tax and Fee Administration (“CDTFA”).
The form now has each category of cultivation broken out separately in a schedule to allow for the reporting of donated products and samples.
If you have any questions, please contact me by email at Bruce@CannabisCPA.Tax or phone 818-225-8022.
