Sales Tax
Friday, January 15th, 2010
The California Board of Equalization (BOE) sent Special Notices to medical cannabis providers this month reminding them that medical cannabis transactions are subject to sales tax. The BOE first made the controversial decision regarding medical cannabis and sales tax in 2005, over the objections of patients and advocates. The board recently stepped up enforcement at medical cannabis collectives by visiting facilities to check for permits and auditing some collectives. Those who do not have permits or have failed to make payments are subject to interest, penalties, plus unpaid tax liability.
Collective and cooperative operators can download an application for a Seller’s Permit, Form SPA-400, from the BOE web site. As far as I know, no one has ever been investigated or prosecuted for selling cannabis based on their Seller’s Permit application. However, operators can avoid self-incrimination by requesting a “Waiver for Incomplete Application” from a BOE field office. This waiver allows applicants to submit the form without explicitly stating that they sell medical cannabis.
The BOE was wrong to decide that patients should pay sales tax on medicine. This runs contrary to typical public and places an undue burden on patients. Nevertheless, the board has the authority to make that decision. Medical cannabis providers ignore this obligation at their peril. Collectives and cooperatives that may have a sales tax liability should contact a qualified and experienced tax attorney for professional advice.
