Sales Tax Requirements, Medical Marijuana Growers
- Oct 7, 2015 | Gail Cole
The medical marijuana business in California has unique sales and use tax obligations. For example, anyone who grows or sells medical marijuana in California is required to register with the California State Board of Equalization (BOE) even when sales are to customers who resell the medical cannabis.
Growers and processors are permitted to sell their product without collecting sales tax only when the customer provides a valid resale certificate at the point of sale. Sales tax applies if no valid resale certificate is provided and growers can be held liable for the tax if it is not collected.
Most purchases made by growers for use in the business (such as office supplies, work gloves, and advertising materials) are subject to California sales and use tax. If a taxable purchase is made from an out-of-state seller that does not collect tax, the grower is required to report the purchase price on the sales and use tax return under Purchases Subject to Use Tax.
Sales tax applies to the following:
- Fertilizer (see also below)
- Ornamental flowers and landscaping plants
- Seeds (see also below)
Sales tax does not apply to the following:
- Fertilizer purchased to apply to land or in foliar application when purchased to produce products for sales
- Plants and clones that will produce products for resale — suppliers should be given a valid resale certificate when such plants or clones are purchased
- Seeds when they or the products grown from them are resold
Partial exemptions for farm equipment and machinery
California permits a partial exemption for certain equipment and machinery, with a valid partial exemption certificate. While farm equipment and machinery is generally taxable, the partial exemption could apply to other equipment and machinery purchased and used by growers. Potentially qualifying equipment and machinery includes the following:
- Drying racks and trays
- Environmental controls
- Greenhouses (designed and use used exclusively for commercial raising of plants)
- Grow tents and lights
- Hydroponic equipment
- Irrigation equipment
- Planting equipment
- Solar equipment
- Trimming tools
Diesel fuel used in farming activities may also be eligible for a partial exemption.