Adult-use cannabis products tax

Change to calculation of adult-use cannabis products tax

Effective for sales on and after June 1, 2024, the total THC-based (potency) tax rates on adult-use cannabis products have been replaced with a tax rate of 9%. This new rate is imposed on the amount charged for the sale or transfer of adult-use cannabis products by a distributor to a retailer.

If you are a registered organization or microbusiness and sell adult-use cannabis products directly to a retail customer, the new 9% tax rate is imposed on 75% of the amount charged for the sale or transfer of those products to the retail customer.

Reminder: Distributors must use the total THC-based (potency) tax rates when calculating the tax on the return for the filing period March 1, 2024, through May 31, 2024, due June 20, 2024.

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If you're a distributor of adult-use cannabis products, you must pay a distributor tax on your sales of those products to adult-use cannabis products retailers.

If you’re a registered organization or microbusiness and sell adult-use cannabis products directly to retail customers, you must also pay the distributor tax on 75% of the amount charged for these sales.

If you're a retailer of adult-use cannabis products, you must pay a retail tax on your sales or transfers of those products to retail customers.

Before you begin distributing or selling adult-use cannabis products, you must complete licensing and registration requirements with both the Office of Cannabis Management and the Tax Department.

A distributor cannot sell adult-use cannabis products to a retailer that does not have an Adult-Use Cannabis Certificate of Registration or that has had their certificate suspended or revoked.

Licensing, registration, and renewal

Step 1: Apply for a license with the Office of Cannabis Management

Before you register with the Tax Department and begin doing business, you must receive an adult-use cannabis license from the Office of Cannabis Management that allows you to distribute adult-use cannabis products or to sell those products at retail to persons 21 years of age and older.

Step 2: Register with the New York State Tax Department

To register, apply online for an Adult-Use Cannabis Certificate of Registration. The application fee is $600. If you have a fixed and final New York State liability, you must resolve that liability before we can approve your application. You may contact the Tax Department to determine if you have any outstanding liabilities or you may view any liabilities in your Online Services account. To pay any outstanding liabilities, see: Pay a bill or notice.

To apply:

Log in to your Business Online Services account (or create one).
Select the ≡ Services menu in the upper-left corner of your Account Summary homepage.
Select Registrations and account updates, then select Business registrations from the expanded menu.

Once your application is approved, the Tax Department will email you instructions on how to print your Form MT-222.7, Adult-Use Cannabis Certificate of Registration.

Renewing your Adult-Use Cannabis Certificate of Registration

An Adult-Use Cannabis Certificate of Registration is valid until the date printed on it unless it has been suspended or revoked earlier. You must renew your registration prior to the printed expiration date. The renewal fee is $600.

Step 3: Determine if you need to register for a sales tax Certificate of Authority

If you sell any tangible personal property anywhere in New York State, you must register with the Tax Department and obtain a Certificate of Authority to collect sales tax. You must report these sales as instructed on your sales tax returns. Examples of tangible personal property subject to sales tax when sold to customers include, but are not limited to:

lighters
rolling papers, and
pipes.

For more information, see Tax Bulletin Do I Need to Register for Sales Tax? (TB-ST-175) and Tax Bulletin How to Register for New York State Sales Tax (TB-ST-360).

If you are an adult-use cannabis products retailer who intends to sell any vapor products other than adult-use cannabis vapor products, you must also register with the Tax Department for sales tax and as a vapor products dealer before you begin selling these products. For more information, see Vapor products.

Note: Adult-use cannabis products are exempt from sales tax and the vapor products tax.

Tax rates summary

The tax rates below are effective for sales on and after June 1, 2024.

Distributor tax: A distributor must pay a 9% distributor tax on the sale or transfer of adult-use cannabis products to a retailer.

If you’re a registered organization or microbusiness and sell adult-use cannabis products directly to a retail customer, the 9% tax rate is imposed on 75% of the amount charged for the sale or transfer of those products to the retail customer.

Retailer tax: A retailer must pay retail taxes totaling 13% on the retail sale or transfer of adult-use cannabis products.

For information on the tax rates prior to June 1, 2024, see Tax rates for sales of adult-use cannabis products prior to June 1, 2024.

Filing returns and paying tax

Adult-use cannabis products distributors and adult-use cannabis products retailers must:

file quarterly tax returns showing the total amount of tax due for the quarters ending May, August, November, and February;
file and pay the tax due no later than the 20th day of the month following the end of each quarter; and
file a return even if no sales were made during the quarter.

Reporting periods and due dates
Quarterly period	Filing due date
March 1–May 31	June 20
June 1–August 31	September 20
September 1–November 30	December 20
December 1–February 28 (29 if leap year)	March 20

If the filing due date falls on a Saturday, Sunday, or legal holiday, the return is due on the next business day.

Distributors and retailers must file online using the Tax Department’s Adult-Use Cannabis Products Tax Web File application. To file:

Log in to your Business Online Services account.
Select the ≡ Services menu in the upper-left corner of your Account Summary homepage.
Select Other taxes, then choose Adult-use cannabis products tax web file from the expanded menu.

For important payment information, see Registration and tax payments.

Penalty and interest

Distributors and retailers must file returns and pay the tax due by the due date to avoid penalty and interest. Use the Penalty and Interest Calculator to calculate the late filing and late payment penalties and interest due.

Registration and tax payments

If you have debit blocks on your bank account, you must communicate with your bank to specifically authorize adult-use cannabis registration and adult-use cannabis products tax payments even if you have already authorized payments for other taxes to the Tax Department. Your bank will process only these authorized transactions.

Note: The Tax Department’s ACH company ID and name for adult-use cannabis registration and adult-use cannabis products tax are different. You must provide your bank with both to avoid payment processing issues.

To find ACH company IDs and names, see ACH debit block information.

Information

Exemptions

The taxes imposed on adult-use cannabis products do not apply to sales to persons holding cannabis research licenses under the Cannabis Law.

Recordkeeping

You must maintain complete and accurate records containing all the information you need to properly prepare your adult-use cannabis products tax returns and to verify their accuracy if you are audited by the Tax Department. This includes, but is not limited to, complete records of every sale of adult-use cannabis products.

If adequate records are not kept and made available, the Tax Department may determine the distributor tax due based on the retail price of any adult-use cannabis products distributed.

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.

Penalties

Adult-use cannabis products distributors and retailers are subject to the penalties below, in addition to any other civil or criminal penalties that may apply.

Penalty for failure to obtain an adult-use cannabis certificate of registration

Any distributor or retailer that has not obtained a certificate of registration but possesses adult-use cannabis products is subject to a penalty up to:

$7,500 for the first violation, and
$15,000 for the second or subsequent violation within three years of a prior violation.

Penalty for recordkeeping violations

Any distributor or retailer that fails to maintain or make required records available to the Tax Department, is subject to a penalty up to $500 for each month or part of a month in which the failure occurs.

Penalties for illicit cannabis

Revocation of certificate of registration

If you are required to obtain a certificate of registration and it is determined you have sold or possessed illicit cannabis, your certificate of registration will be revoked for up to:

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.

Revocation of Certificate of Authority

Your sales tax Certificate of Authority may be revoked if you:

do not have an Adult-Use Cannabis Certificate of Registration, and
it is determined you have possessed or sold any adult-use cannabis products or illicit cannabis three or more times within five years.

Civil penalties

If you knowingly possess or have control over any type of illicit cannabis, you may be liable for a civil penalty as follows, after notice and an opportunity for a hearing:

two times the adult-use cannabis products tax required to be paid for the product for the first violation; and
three times the adult-use cannabis products tax required to be paid for the product for the second or subsequent violation within three years of a prior violation.

If you knowingly possess for sale illicit cannabis, illicit concentrated cannabis, or illicit cannabis edible products, you may be liable for a civil penalty as follows, after notice and an opportunity for a hearing:

Possession fines
If you possess for sale	you are subject to the following penalties:
more than 5 pounds but less than 12 pounds of illicit cannabis	up to $25,000 for the first violation; and up to $50,000 for a second or subsequent violation within three years of a prior violation.
more than 1 pound but less than 4 pounds of illicit concentrated cannabis or illicit cannabis edible product	up to $25,000 for the first violation; and up to $50,000 for a second or subsequent violation within three years of a prior violation.
12 or more pounds of illicit cannabis	up to $75,000 for the first violation; and up to $100,000 for a second or subsequent violation within three years of a prior violation.
4 or more pounds of illicit concentrated cannabis or illicit cannabis edible product	up to $75,000 for the first violation; and up to $100,000 for a second or subsequent violation within three years of a prior violation.

If you knowingly possess more than 5 pounds of illicit cannabis or more than 1 pound of illicit concentrated cannabis or illicit cannabis edible product, for sale in a commercial location, you may be liable for additional civil penalties as follows, after notice and an opportunity for a hearing:

$50,000 for a first violation; and
$100,000 for a second or subsequent violation within three years of a prior violation.

Penalty for selling to an unregistered retailer

Adult-use cannabis products distributors who knowingly sell any adult-use cannabis products to any person who is not registered as an adult-use cannabis products retailer but is selling such products at retail, or whose registration has been suspended or revoked, may be liable for a civil penalty as follows, after notice and an opportunity for a hearing:

$50,000 for a first violation; and
$100,000 for a second or subsequent violation within three years of a prior violation.

Penalty for tax fraud acts

You may be subject to criminal penalties and a jail sentence if you:

knowingly fail to pay the adult-use cannabis products tax; or
knowingly possess any adult-use cannabis product for sale and the adult-use cannabis products tax required to be paid has not been paid.

Inspections and examinations

The Tax Department is authorized to perform the following wherever adult-use cannabis products are distributed, placed, stored, sold or offered for sale:

conduct inspections during normal business hours of any place of business, including a vehicle used for such business; and
examine any adult-use cannabis products and the books, papers, invoices and other records of any place of business or vehicle.

Refusal to give the Tax Department the means, facilities, and opportunity for the inspections and examinations required, after notice and an opportunity for a hearing, may result in the revocation of a Certificate of Registration for:

one year for the first refusal,
up to three years for a second refusal within three years, and
up to seven years for a third refusal within five years.

Definitions

Adult-use cannabis products means cannabis, concentrated cannabis, and cannabis-infused products, as reflected on the product label, whether or not for use by a cannabis consumer. It does not include medical cannabis or cannabinoid hemp product.

Commercial location means real property or a vehicle held out as open to the public or otherwise used to conduct wholesale or retail transactions, including a storage area in or adjacent to such property or vehicle. It does not include a residence or a personally owned vehicle located at such residence.

Distributor means any person who sells at wholesale any cannabis product, except medical cannabis, which requires an adult-use cannabis license issued by the Office of Cannabis Management.

Illicit cannabis means and includes any adult-use cannabis product, including concentrated cannabis, and cannabis edible products 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.

Place of business does not include a residence or other real property, or any personal vehicle on or about such property, not held out as open to the public or otherwise being utilized in a business or commercial manner, unless probable cause exists to believe that such residence, real property or vehicle is being used in a business or commercial manner for the buying or selling of adult-use cannabis products.

Possession for sale means possession of more than five pounds of adult-use cannabis products, or one pound of concentrated cannabis products or cannabis edible products, at a business or other location used for the storage, distribution or sale of such cannabis products, with the intent to sell the products at retail.

Retailer means any person who sells at retail any cannabis product, which requires an adult-use cannabis license issued by the Office of Cannabis Management.

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.

Frequently asked questions

Can I apply for an Adult-Use Cannabis Certificate of Registration if I have not received my adult-use cannabis license?

No. You must have a valid license from the Office of Cannabis Management before you can apply.

Who’s required to register with the Tax Department as an adult-use cannabis products distributor?

You must register as an adult-use cannabis products distributor if you sell or transfer adult-use cannabis products to an adult-use cannabis products retailer.

Who’s required to register with the Tax Department as an adult-use cannabis products retailer?

You must register as an adult-use cannabis products retailer if you sell adult-use cannabis products to a retail customer.

I am licensed with the Office of Cannabis Management as a registered organization. Am I required to register with the Tax Department as an adult-use cannabis products retailer or distributor?

If you sell or transfer adult-use cannabis products to an adult-use cannabis products retailer, you must register as an adult-use cannabis products distributor. If you sell adult-use cannabis products to a retail customer, you must register as an adult-use cannabis products distributor.

I am licensed with the Office of Cannabis Management as a microbusiness. Am I required to register with the Tax Department as an adult-use cannabis products retailer or distributor?

Do I need to register with the Tax Department if I am an individual that uses or cultivates cannabis?

An individual who participates in lawful personal use or personal cultivation of cannabis is not required to register.

Who’s required to file an adult-use cannabis products tax return?

You must file returns with the Tax Department if you are:

a distributor that sells adult-use cannabis products to a retailer, and/or
a retailer that sells or transfers adult-use cannabis products 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 sales tax Certificate of Authority at least 20 days before beginning business.

Are adult-use cannabis products subject to sales tax?

No. Adult-use cannabis products are exempt from sales tax.

Can a tax professional register on behalf of an adult-use cannabis products distributor or retailer?

No. Tax professionals cannot apply for an Adult-Use Cannabis Certificate of Registration on behalf of their clients.

Can I distribute or sell adult-use cannabis products as soon as I register with the Tax Department as an adult-use cannabis distributor, adult-use cannabis retailer, or both?

No. You must wait until the Tax Department emails Form MT-222.7, Adult-Use Cannabis Certificate of Registration, to you for printing before you can distribute or sell adult-use cannabis products.

I am an adult-use cannabis products retailer. How do I determine the jurisdiction for reporting my retail sales of adult-use cannabis products on my adult-use cannabis products tax return?

Enter the taxable sales of adult-use cannabis products on the jurisdiction line for the county where your registered retail dispensary is located.

Do the penalties for illicit cannabis apply to an individual?

The illicit cannabis penalties can apply to an individual. However, they do not apply to certain amounts of cannabis possessed by an individual for personal use and not intended for sale.

Resources

Demo: Adult Use Cannabis Web File Demonstration

Demo: Adult Use Cannabis Registration Demonstration

Updated: July 24, 2024