Adult-use cannabis products excise tax

The taxes imposed on AUC do not apply to sales to a person holding a cannabis research license under the Cannabis Law.

A cannabis research license permits a licensee to produce, process, purchase, and/or possess cannabis for the following limited research purposes:

• to test chemical potency and composition levels;
• to conduct clinical investigations of cannabis-derived drug products;
• to conduct research on the efficacy and safety of administering cannabis as part of medical treatment; and
• to conduct genomic or agricultural research.

You must maintain complete and accurate records containing all the information you need to properly prepare your AUC tax returns and to verify their accuracy if you are audited by the Tax Department. This includes, but is not limited to:

• the total THC content of the AUC sold or produced; and
• complete records of every sale of AUC.

You must retain all records for three years after the due date of the return they relate to or the date you file the return, whichever is later.

Penalty for failure to obtain a Certificate of Registration

If you’re required to obtain a Certificate of Registration and do not, you will be subject to a penalty of $500 for each month, or part of a month, during which you possess AUC without a certificate, up to $10,000.

Penalty for recordkeeping violations

Every AUC distributor and AUC retailer who fails to maintain or make available required records is subject to a penalty up to $500 for each month or part of a month in which the failure occurs.

Penalty for illicit cannabis

If you’re an AUC distributor or an AUC retailer who is required to obtain a Certificate of Registration, and who is determined to have possessed or sold illicit cannabis, your Certificate of Registration will be revoked for:

• one year for the first such sale or possession,
• three years for a second such sale or possession within five years, and
• five years for a third such sale or possession within five years.

Any person knowingly in possession of or having control over illicit cannabis, after notice and an opportunity for a hearing, is liable for a civil penalty of not less than:

• $200 per ounce of illicit cannabis flower,
• $5 per milligram of the total weight of any illicit cannabis edible product,
• $50 per gram of the total weight of any product containing illicit cannabis concentrate, and
• $500 per illicit cannabis plant.

The penalty for a first violation cannot exceed:

• $400 per ounce of illicit cannabis flower,
• $10 per milligram of the total weight of any illicit cannabis edible product,
• $100 per gram of the total weight of any product containing illicit cannabis concentrate, and
• $1,000 per illicit cannabis plant.

For a second and subsequent violation occurring within three years following a prior violation, any person will be liable for a civil penalty of not less than:

• $400 per ounce of illicit cannabis flower,
• $10 per milligram of the total weight of any illicit cannabis edible product,
• $100 per gram of the total weight of any product containing illicit cannabis concentrate, and
• $1,000 per illicit cannabis plant.

The penalty for a second or subsequent violation cannot exceed:

• $500 per ounce of illicit cannabis flower,
• $20 per milligram of the total weight of any illicit cannabis edible product,
• $200 per gram of the total weight of any product containing illicit cannabis concentrate, and
• $2,000 per illicit cannabis plant.

Adult-use cannabis products or adult-use cannabis means cannabis, concentrated cannabis, and cannabis-infused products for use by a person 21 years of age or older. It does not include medical cannabis or cannabinoid hemp product.

Adult-use cannabis products retailer means any person who is licensed by the Office of Cannabis Management to sell adult-use cannabis products at retail.

Adult-use cannabis products distributor means any person who is licensed by the Office of Cannabis Management to distribute and sell adult-use cannabis products to a person who sells such products at retail.

Cannabis edible product means a product containing either Cannabis or concentrated cannabis and other ingredients, intended for use or consumption through ingestion, including sublingual or oral absorption.

Cannabis flower means the flower of a plant of the genus Cannabis that has been harvested, dried and cured but has not undergone any processing whereby the plant material is transformed into a concentrate, including but not limited to, concentrated cannabis, or into an edible or topical product containing cannabis or concentrated cannabis and other ingredients. Cannabis flower excludes leaves and stem.

Concentrated cannabis means the separated resin, whether crude or purified, obtained from cannabis; or a material, preparation, mixture, compound or other substance which contains more than three percent by weight or by volume of total THC.

Illicit cannabis means and includes cannabis flower, concentrated cannabis, cannabis edible product, and cannabis plant on which any tax required to have been paid has not been paid. Illicit cannabis does not include any cannabis lawfully possessed.

Person means every individual, partnership, limited liability company (LLC), society, association, joint stock company, corporation, estate, receiver, trustee, assignee, referee, and any other person acting in a fiduciary or representative capacity, whether appointed by a court or otherwise, and any combination of the foregoing.

Sale means any transfer of title, possession, or both, exchange or barter, rental, lease or license to use or consume, conditional or otherwise, in any manner or by any means whatsoever for a consideration or any agreement therefor.

THC means Delta-9-tetrahydrocannabinol; Delta-8-tetrahydrocannabinol; Delta-10-tetrahydrocannabinol; and the optical isomer of such substances.

Total THC means the sum of the percentage by weight or volume measurement of tetrahydrocannabinolic acid multiplied by 0.877, plus the percentage by weight or volume measurement of THC.

Can I register for the AUC tax if I have not received my AUC license?

No. You must have a valid license from OCM before you can apply.

Who’s required to register with the Tax Department as an AUC distributor?

You must register as an AUC distributor if you sell or transfer AUC to an AUC retailer.

Who’s required to register with the Tax Department as an AUC retailer?

You must register as an AUC retailer if you sell AUC to an AUC consumer.

Who’s required to register with the Tax Department as both an AUC distributor and an AUC retailer?

You must register as both an AUC distributor and retailer if you sell or transfer AUC to an AUC retailer and sell AUC to an AUC consumer.

Who’s required to file an AUC tax return?

You must register for the AUC tax and file returns with the Tax Department if you are:

• an AUC distributor that sells AUC to an AUC retailer, and/ or
• an AUC retailer that sells or transfers AUC to a retail customer.

Do I need to register for a sales tax Certificate of Authority?

If you plan to sell taxable tangible personal property or provide taxable services, you must apply for your certificate at least 20 days before beginning business.

Can a tax professional register on behalf of an AUC distributor or retailer?

No. Tax professionals cannot apply for an AUC Certificate of Registration on behalf of their clients.