SECTION 4: Taxation
Add Part 13.5 (commencing with Section 31001) to Division 2 of the Revenue and Taxation Code, to read:
CHAPTER 1. General Provisions and Definitions
31001. This part is known and may be cited as the “Cannabis and Cannabis Products Tax Law.”
31002. Unless the context otherwise requires, the definitions set forth in this chapter and those in Chapter 1 (commencing with Section 26000) of Division 10 of the Business and Professions Code govern the construction of this part.
(a) “Person” includes any individual; firm; partnership; joint venture; limited liability company; association; social club; fraternal organization; corporation; estate; trust; business trust; receiver; assignee for the benefit of creditors; trustee; trustee in bankruptcy; syndicate; the United States; this state; any county, city and county, municipality, district, or other political subdivision of the state; or any other group or combination acting as a unit.
(b) “Registrant” means a person liable for the collection and transmission of a tax payment pursuant to this part.
(c) “Retail sale” means “sale at retail” as defined in Section 6007.
(d) “Sale,” as used in Sections 32151 and 32201 of this code, includes the transaction whereby cannabis or cannabis products are transferred with consideration:
(1) By a registrant to another registrant; or
(2) By a registrant holding one type of license to herself or himself, whether for use under a different license or for personal use; or
(3) By a registrant to an adult age 21 years or older purchasing one ounce, or such other amount established by the commission, for personal consumption pursuant to the provisions of the Act.
(e) “Tax,” as used in this part, except in Chapters 4 (commencing with Section 32151) and 5 (commencing with Section 32201), means the various taxes imposed by this part on the sale or transfer of cannabis or cannabis products.
CHAPTER 2. Imposition of Tax
31003. Except as otherwise provided in this part, taxes are imposed on cannabis cultivation and retail sale in this state as follows:
(a) Cultivation Tax. There is hereby imposed an annual cultivation tax of two dollars ($2) for each square foot of cannabis canopy licensed. One dollar ($1) per square foot of such tax shall be collected by the board in connection with licensing the production of cannabis and shall be remitted to the city, or county(in instances in which cannabis is grown in an unincorporated area), in which the cannabis is grown. One dollar ($1) per square foot of such tax shall be collected by the board in connection with licensing the production of cannabis and shall be remitted by the board to the Environmental Restoration and Protection Account in the Cannabis Safety Fund as provided in Business and Professions Code Section 26022.
(b) Production Tax. There is hereby imposed a production tax on all harvested cannabis that enters the commercial market. The tax shall be paid by the first purchaser after cannabis is harvested and processed (such as a manufacturer, wholesaler, or retailer, or in the case of farm-direct sales, by the retailing farm). This tax shall be collected by the board. Ninety percent (90%) of the production tax shall be remitted by the board to the Cannabis Safety Fund, and ten percent (10%) shall be remitted by the board to the city or county (in instances in which cannabis is grown in an unincorporated area) where the cannabis is grown.
(1) The basic production tax shall be fifteen dollars ($15) per dry-weight ounce of cannabis flowers sold. This basic rate is reduced to five dollars ($5) per ounce for the first five hundred (500) pounds of cannabis flowers sold in a given year by every small-scale cultivation licensee holding no more than one-half (1/2) acre in total cultivation area.
(2) The tax rate for other cannabis shall initially be set at one-fifth (1/5) the rate for flowers, or one dollar ($1) per ounce for the first five hundred (500) pounds of other cannabis sold in a given year by a licensee holding no more than one-half (1/2) acre in cultivation area, and three dollars ($3) per ounce for all additional cannabis. The office may adjust the tax rate annually to reflect fluctuations in the relative price of flowers to other cannabis, such that the tax rate for other cannabis shall equal the basic rate for flowers multiplied by the ratio of the average market price of flowers to other cannabis.
(3) The office may from time to time establish other categories of harvested cannabis, which shall be taxed at their relative value compared with flowers. The tax rate for each category shall equal the basic rate for flowers multiplied by the ratio of the average market price of that category to flowers.
(c) The cultivation and production tax shall be adjusted for inflation, according to the Consumer Price Index, as determined by the office.
(d) Retail Tax on Sales. Except as provided in subsection (f) below, there is hereby imposed an ad valorem five percent (5%) tax on all retail sales of cannabis and cannabis products except edible cannabis products for oral ingestion and concentrated extracts and an ad valorem ten percent (10%) tax is imposed on retail sales of edible cannabis products for oral ingestion and concentrated extracts. This tax shall be collected by the board. All revenues from this tax shall be remitted by the board to the Cannabis Safety Fund.
(e) Retail Tax for Local Government. There is hereby imposed an additional five percent (5%) tax on the retail sales price of all cannabis and cannabis products. All revenue from this tax shall be collected by the board and remitted by the board to the city or county (in instances in which cannabis and cannabis products are sold in an unincorporated area) where sold.
(f) The taxes imposed under subdivision (d) above shall not apply to retail sales of medical cannabis or cannabis products when the purchaser furnishes evidence to the retailer that the purchaser is a qualified patient (or primary caregiver for a qualified patient), and neither the taxes imposed under subdivision (d) or subdivision (e) nor the state sales tax shall apply to retail sales of medical cannabis or medical cannabis products upon furnishing to the retailer by the purchaser evidence that the purchaser is a qualified patient (or primary caregiver for a qualified patient) who is eligible for Medi-Cal.
(g) Preemption of Other Local Taxes. It is the intent of this section to address taxation directed at cannabis and cannabis products and to prohibit any additional local taxes solely on cannabis and cannabis products. Once the board begins collecting the taxes imposed under subdivisions (a), (b), (d), and (e), no city or county may collect taxes directed at cannabis and cannabis products, and all such taxes are preempted.
31004. A rebuttable presumption shall be presumed, for the purposes of this part, that all cannabis and cannabis products removed from the premises of a registrant have been sold in this state by the registrant.
31005. Any claim for exemption from taxes under this article shall be made to the board in such manner as the board shall prescribe.
31006. Notwithstanding Government Code Section 13340, and except for payments of any refunds made pursuant to the board’s regulations, reimbursement of the board for expenses incurred in the administration and collection of the taxes imposed by this chapter, and the cost of the track and trace program implemented pursuant to Section 31200, all monies raised pursuant to the taxes imposed by this chapter shall be deposited in the Cannabis Safety Fund and are continuously appropriated for the exclusive purpose of the California Cannabis Commission established by Division 10 (commencing with Section 26000) of the Health and Safety Code.
CHAPTER 3. Administration
31007. Upon the issuance of any license under Division 10 (commencing with Section 26000) of the Business and Professions Code, the office shall furnish a copy thereof to the board. Other state agencies issuing cannabis licenses shall also furnish a copy to the board. Every cannabis licensee shall register with the board. Every application for registration shall be in addition to any application for licensure, shall be made upon a form as prescribed by the board, and shall set forth the name under which the applicant transacts or intends to transact business, the location of its place or places of business, and such other information as the board may require.
An application for registration shall be filed using electronic media as prescribed by the board. An application for registration shall be authenticated in a form or pursuant to methods as may be prescribed by the board.
31008. (a) The tax is due and payable to the board quarterly on or before the last day of the month following each calendar quarter, unless otherwise provided by the board.
(b) On or before the last day of the month following each calendar quarter, a return for the preceding calendar quarter shall be filed with the board using electronic media, unless otherwise provided by the board.
(c) Returns shall be authenticated in a form or pursuant to methods as may be prescribed by the board.
31009. To the extent feasible or practicable, the provisions of Chapter 5 (commencing with Section 6451), Chapter 6 (commencing with Section 6701), Chapter 7 (commencing with Section 6901), and Chapter 8
(commencing with Section 7051) of Part 1 of the Taxation and Revenue Code shall govern returns and payments, security payments, determinations, collections of fees, overpayments and refunds, and administration under this part.
31010. The board may adopt any regulations necessary for the implementation of this part, including but not limited to procedures for refunds, redeterminations, collection, reports, and enforcement.
CHAPTER 4. Track and Trace Process
31011. As soon as is practicable, the board shall adopt a cannabis track and trace program for recording and reporting the cultivation, manufacturing, and movement of cannabis and cannabis products throughout the distribution chain. The program shall require the use of secure packaging and encrypted technology capable of capturing transactional data and being read by a scanning or similar device. The technology shall capture, at a minimum, the following: the entire history of the cannabis, from cultivation until sale or other legal disposition; the amount of any tax paid, and the registrant that remitted the tax; transaction dates; and any other information deemed necessary by the board for the taxation and regulation of cannabis and cannabis products.
SECTION 5. Section 11361.52 of Division 10 is added to the Health and Safety Code, to read:
Records of any court of this state, any public or private agency that provides services upon referral under Section 1000.2 of the Penal Code, or of any state agency pertaining to the arrest or conviction of any person for a violation of Sections 11357, 11358, 11359, 11360, 11361 of the Health and Safety Code, as well as violations of Sections 11365, 11366, 11366.5, 11379.6 of the Health and Safety Code, and Section 23222(b) of the Vehicle Code involving cannabis, may be reviewed by the superior court of the State of California for relief pursuant to Health and Safety Code Section 11361.5. Upon granting of an application filed under this section, all courts and public agencies and offices having custody of the records subject to this relief shall commence the timely destruction of the records in a manner provided by Health and Safety Code Section 11361.5.
SECTION 6. Section 19302 of the Business and Professions Code is amended, to read:
19302. (a) There is in the Department of Consumer Affairs the Bureau of Medical Marijuana Regulation, under the supervision and control of the director. The director shall administer and enforce the provisions of this chapter. Commencing July 1, 2017, the bureau shall be under the supervision and control of the California Cannabis Commission, and the commission shall administer and enforce the provisions of this chapter.
(b) Commencing July 1, 2017, whenever the term “director” is used in this chapter, it shall mean the executive director of the Office of Cannabis Regulation.
SECTION 7. Section 19302.1 of the Business and Professions Code is amended, to read:
(a) The Governor shall appoint a chief of the bureau, subject to confirmation by the Senate, at a salary to be fixed and determined by the director with the approval of the Director of Finance. The chief shall serve under the direction and supervision of the director and at the pleasure of the Governor until June 30, 2017. Commencing July 1, 2017, the commission shall appoint a chief of the bureau at a salary to be fixed and determined by the commission. Commencing July 1, 2017, the chief shall serve under the direction and supervision of the director and at the pleasure of the commission.
(b) Every power granted to or duty imposed upon the director under this chapter may be exercised or performed in the name of the director by a deputy or assistant director or by the chief, subject to conditions and limitations that the director may prescribe. In addition to every power granted or duty imposed with this chapter, the director shall have all other powers and duties generally applicable in relation to bureaus that are part of the Department of Consumer Affairs.
(c) The director may employ and appoint all employees necessary to properly administer the work of the bureau, in accordance with civil service laws and regulations.
(d) The Department of Consumer Affairs shall have the sole authority to create, issue, renew, discipline, suspend, or revoke licenses for the transportation, storage unrelated to manufacturing activities, distribution, and sale of medical marijuana within the state and to collect fees in connection with activities the bureau regulates. The bureau may create licenses in addition to those identified in this chapter that the bureau deems necessary to effectuate its duties under this chapter.
(e) The Department of Food and Agriculture shall administer the provisions of this chapter related to and associated with the cultivation of medical cannabis. The Department of Food and Agriculture shall have the authority to create, issue, and suspend or revoke cultivation licenses for violations of this chapter. The State Department of Public Health shall administer the provisions of this chapter related to and associated with the manufacturing and testing of medical cannabis.
SECTION 8. Section 1204.4b is added to the Penal Code, to read:
Any person on probation for a violation of Sections 11357, 11358, 11359, 11360, 11361 of the Health and Safety Code, or a cannabis-specific violation of Sections 11365, 11366, 11366.5, 11379.6 of the Health and Safety Code, and Section 23222(b) of the Vehicle Code, at the time this section is enacted, shall have the right to petition the court for early termination of probation and for the relief granted in Section 1203.4(a). The court shall treat such petitions as if the originally imposed term of probation had been completed.
SECTION 9. Section 11594.1 is added to the Health & Safety Code, to read:
Notwithstanding Section 11590, any person who has been required to register for a violation of Sections 11357, 11358, 11359, 11360, 11361 of the Health and Safety Code, or a cannabis-specific violation of Sections 11366, 11366.5, 11379.6 of the Health and Safety Code, or a violation of any other state’s law that would have been punishable in California under these provisions, shall have all registration requirements terminate upon the discharge from prison, release from jail, or termination of probation or parole of the person convicted.
SECTION 10. No reimbursement is required by this Act pursuant to Section 6 of Article XIII B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred as a result of this Act creating a new crime or infraction, eliminating a crime or infraction, or changing the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changing the definition of a crime within the meaning of Section 6 of Article XIII B of the California Constitution.
SECTION 11. The provisions of this Act are severable. If any provision of this Act or its application is held invalid, that invalidity shall not affect other provisions or applications that can be given effect without the invalid provision or application.
SECTION 12. (a) In the event this measure and another measure or measures relating to the decriminalization of cannabis are approved by a majority of voters at the same election, and this measure receives a greater number of affirmative votes than any other such measure or measures, this measure shall control in its entirety and the other measure or measures shall be rendered void and without any legal effect. If this measure is approved by a majority of the voters but does not receive a greater number of affirmative votes than the other measure or measures, this measure shall take effect to the extent permitted by law.
(b) If this measure is approved by voters but is superseded in whole or in part by the provisions of any other conflicting measure approved by the voters and receiving a greater number of affirmative votes at the same election, and the conflicting measure or any superseding provisions thereof are subsequently held to be invalid, the formerly superseded provisions of this measure shall be self-executing and given full force of law.
SECTION 13. The provisions of this Act may be amended to carry out its purpose and intent by statutes approved by a sixty percent (60%) vote of each house of the Legislature and signed by the Governor.
SECTION 14. The provisions of this Act shall become effective immediately upon passage.
