Tax and Fee Changes for Medical Marijuana Patients upon Prop. 64 Passage

UPDATE 11/22: State leaders scramble to delay tax break for medical marijuana patients

October 28, 2016 – The California State Board of Equalization has issued an announcement about the effect of Proposition 64 on sellers of medical marijuana.

The BOE states that if Proposition 64 passes, effective November 9, 2016, qualified patients or their primary caregivers will be exempted from retail sales tax on medical cannabis, medical cannabis concentrate, edible medical cannabis products, or topical cannabis if they present a valid Medical Marijuana Identification Card issued by the California Department of Public Health at the time of purchase.

Medical marijuana retailers would be able to claim the exemption on their sales and use tax return. Retailers would need to retain supporting documentation to substantiate exempt transactions.

The base rate for Sales and Use taxes in California is 7.5%; some places enact higher rates.

People will still need, at the least, medical marijuana recommendations from a doctor to purchase cannabis at a dispensary in California until 2018 when retail licenses are issued for recreational shops; also patients will need recommendations if they want to grow more than the 6-plant limit in Prop. 64 (in places that will allow medical marijuana cultivation).

If Proposition 64 passes, effective January 1, 2018, a 15 percent excise tax, based on the gross receipts from the retail sale, would be imposed upon retail purchasers of all marijuana and marijuana products, including medical marijuana. In addition, a tax on cultivators of marijuana would be imposed. Patients would not be excluded from these taxes.

If Proposition 64 does not pass, the sales of medical marijuana and medical marijuana-related products remain subject to sales and use tax, and there will be no excise tax or cultivation tax imposed.

In addition, over 50 cities and counties have measures on the November ballot to enact taxes on medical marijuana, or on recreational marijuana should Prop 64 pass. The taxes on patients will go into effect immediately or on January 1, 2017; check with your local officials. Current local taxes on medical marijuana will not be exempted under the new law.

The cost of the State Medical Marijuana Card ID will be capped at $100 (or $50 for MediCal patients) on November 9, since that provision is also in Prop. 64. ID cards are issued through county health department offices (except for Sutter county, which does not participate in the ID card program).

The ID card program is voluntary in California; however patients with a doctor’s recommendation only will not qualify for the tax break should Prop. 64 pass.

The state ID card system has safeguards to protect patient privacy. Patient names and addresses are not kept in the state’s database: the only information retained is a personal photo and ID number. Read more on ID cards.

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