Taxes and cannabis in California

Taxes and cannabis in California

Due to the nature of the cannabis business in California, we had to move our ” price you see is the price you pay” model to a line-item tax not included. This was a hard decision as we have been doing this for over 17 years all baked in taxes.

What changed?  The CDFA (tax Department of CA) is hiding a compound sales tax in the sale.  Unlike anything else you buy; you pay for the item and the sales tax on that item not on the item and other taxes included in the item.

This is straightforward, and anyone can understand. The State of California Department of Cannabis Control and the CTFA have decided cannabis needs to be treated by compounding the sales tax. As an example: The item is $10.00, we add the excise (15% sliding scale) then the county tax (4%), and the sales tax depending on that county 7.75%-8.50% to the $10.00, not the items worth ($10.00) and all the taxes afterward.

The CDFA has made sales tax a compounding tax now and believes YOU need to pay more. So as the same example they want cannabis companies to add the sales tax after the other taxes for a total —then charge sales tax. A $10.00 item excise tax of 15% is $1.50 added, then a 4% county cannabis tax is 40 cents for a total of $11.90 ( now sales tax the $11.90). This is a tax on a tax on a tax making it compound. That is unjust and not fair as any item you buy is not handled this way only cannabis. This is hidden from the consumers so the state can get more revenue from people by compounding the sales tax.


(below you can see this directly from the CTFA) a link is also provided as well.


Tax Guide for Cannabis Businesses



Example of Tax Computation Beginning January 1, 2023

The following is an example of how the cannabis excise tax is calculated for retail sales of cannabis or cannabis products made on or after January 1, 2023, along with how sales tax is calculated.

For this example, the selling price of a cannabis product is $35.00. You deliver the item to your customer with your own vehicle and charge a $5.00 delivery fee. This example also assumes an 8.5 percent sales tax rate and a 10 percent local cannabis business tax which you separately state on the receipt to your customer. Both the local cannabis business tax and delivery fee in this example are subject to the cannabis excise tax and sales tax.

Excise tax calculation:

Selling price of cannabis product
Local cannabis business tax ($35.00 × 10%)
+ $5.00
Subtotal subject to excise tax
Cannabis excise tax rate
x 15%
Excise tax ($43.50 × 15%)
Subtotal ($43.50 + $6.53)

The 15 percent cannabis excise tax rate applies to the subtotal of $43.50, which calculates to $6.53 of cannabis excise tax due for this example.

We can now calculate the sales tax for this transaction. Gross receipts for purposes of calculating the sales tax include the cannabis excise tax. Therefore, the subtotal of $43.50 and the cannabis excise tax due of $6.53 are added to calculate the gross receipts subject to sales tax.

Sales tax computation:

Subtotal ($43.50 + $6.53)
Sales tax rate
x 8.5%
Sales tax ($50.03 × 8.5%)
Total due ($50.03 + $4.25)

The 8.5 percent sales tax rate applies to the subtotal of $50.03, which calculates to $4.25 of sales tax due for this example, and the total amount due from the customer is $54.28.

This is just a sample scenario. Different sales tax, cannabis excise tax, and local cannabis business tax rates may apply to your transactions, and you must use the rates in effect at the time of sale.

You may look up the current sales and use tax rate by visiting our Find a Sales and Use Tax Rate webpage.

The current cannabis excise tax rate is posted on our Special Taxes and Fees Rates Page under Cannabis Taxes.

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