Cannabis tax law and legislation
The Governor signed Assembly Bill 37 on October 12, 2019. This may affect the way you deduct your business expenses. We are developing new content and it will be available soon. Visit California's Legislative Information website for more information on Assembly Bill 37.
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.
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 (IRC) Section 501(c) or California Revenue and Taxation Code (R&TC) Section 23701.
|Bureau of Cannabis Control||
|CalCannabis Cultivation Licensing, California Department of Food and Agriculture||Cultivation|
|California Department of Public Health||Manufacturing|
Law prior to 2018
Medicinal cannabis businesses operated as nonprofit cooperatives or collectives prior to 2018. The California Department of Justice published guidelines that stated 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 IRC Section 501(c) or California R&TC Section 23701.
Incorporated cooperatives, incorporated collectives, and unincorporated collectives must report income by filing an annual tax return. These entities generally file a Form 100, California Corporation Franchise or Income Tax Return.
Major California cannabis legislation
- June 27, 2017: The 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
For questions about cannabis income taxes, email FTB Cannabis.