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Cannabis tax law and legislation

Cannibis.

Keep up with the California tax law and legislation related to medicinal and adult-use of cannabis.

The Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA), SB 94, passed on June 27, 2017. It established a comprehensive system to control and regulate the cultivation, distribution, transport, storage, manufacturing, processing, and sale of medicinal and adult-use cannabis, and related products.

The MAUCRSA defines the power and duties of the various state agencies responsible for controlling and regulating the commercial medicinal and adult-use cannabis industry.

New law beginning 2018

Cannabis businesses that have already received any required licenses or permits from their local jurisdiction may apply for state licenses to operate from various agencies.

Businesses operating under these state licenses can choose any form of valid business structure for their business. They are able to operate on a for-profit or not-for-profit basis. They are not eligible for California franchise and income tax exemption, as they do not meet the requirements as described in Internal Revenue Code Section 501(c) or California Revenue and Taxation Code (R&TC) Section 23701.

Cannabis Business licenses, by Agency
Agency License Types
Bureau of Cannabis Control
  • Testing Laboratories
  • Dispensaries
  • Distribution
  • Transportation
CalCannabis Cultivation Licensing, California Department of Food and Agriculture Cultivation
California Department of Public Health Manufacturing

Current tax law

Medicinal cannabis businesses should operate as a nonprofit cooperative or collective under current law.

The California Department of Justice published guidelines that state businesses may operate as statutory cooperatives (incorporated) or as a collective (either incorporated or unincorporated).

Cannabis businesses are not eligible for California franchise and income tax exemption. Although some medicinal cannabis businesses formally incorporate as nonprofit mutual benefit corporations or nonprofit cooperatives, they do not meet the requirements for income tax exemption described in Internal Revenue Code Section 501(c) or California Revenue and Taxation Code (R&TC) Section 23701.

Incorporated cooperatives, incorporated collectives, and unincorporated collectives must report income by filing an annual tax return. Incorporated entities generally file a Form 100, California Corporation Franchise or Income Tax Return.

Major California cannabis legislation

  • June 27, 2017: The Medicinal and Adult-Use Cannabis Regulation and Safety Act(MAUCRSA) consolidated elements of the Medical Cannabis Regulation and Safety Act (MCRSA) and the Adult Use of Marijuana Act (AUMA), Senate Bill 94. AB 133, passed on September 22, 2017, made some technical changes and removed the provision that the licensed premises for commercial medicinal and adult-use cannabis industry be separate and distinct.
  • 2016: The Adult Use of Marijuana Act (AUMA), Proposition 64, passed, allowing for recreational marijuana use and sale.
  • 2016: The Medical Cannabis Regulation and Safety Act (MCRSA), SB 837, AB 21, AB 2516, and AB 2679 expanded on the MMRSA
  • 2015: The Medical Marijuana Regulation and Safety Act (MMRSA) established a regulatory structure for medical marijuana businesses (Assembly Bills 243 and 266, and Senate Bill 643).
  • 2003: The Medical Marijuana Program Act (MMPA) established guidelines for its lawful cultivation, use, and distribution.
  • 1996: The Compassionate Use Act authorized the use of medical marijuana.

Contact us

For questions about cannabis income taxes, email FTB Cannabis.

Cannabis business resources

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