AB 2243, as amended, Wood. Medical cannabis: taxation: cannabis production and environment mitigation.
The Medical Marijuana Regulation and Safety Act, administered by the director of the Bureau of Medical Marijuana Regulation, provides for the licensure of persons engaged in specified activities relating to medical cannabis, including cultivation and distribution.
The Fee Collection Procedures Law, the violation of which is a crime, provides procedures for the collection of certain fees and surcharges.
This bill would impose a tax in specified amounts upon the distribution of medical cannabis flowers, medical cannabis leaves, and immature medical cannabis plants. The bill would require the State Board of Equalization to administer and collect the tax pursuant to the procedures set forth in the Fee Collection Procedures Law. The bill would require a distributor to register for a permit with the board and would allow the board to suspend or revoke a permit. The bill would authorize the board to prescribe by regulation a method and manner for payment of the tax that utilizes tax stamps or state-issued product bags. The bill would require all moneys, less refunds and costs of administration, to be deposited into the Cannabis Production and Environment Mitigation Fund, which this bill would establish in the State Treasury.
This bill would continuously appropriate the moneys in that fund in specified percentages to fund competitive grants for local law enforcement-related activities pertaining to illegal cannabis cultivation; to fund a competitive grant program for environmental cleanup restoration and protection of public and private lands that have been damaged by illegal cannabis cultivation; to address the environmental impacts of cannabis cultivation on public and private lands in California and fund other state enforcement-related activities pertaining to illegal cannabis cultivation; and to fund ongoing studies and reports of areas that may create challenges to compliance of the Medical Marijuana Regulation and Safety Act. This bill would require the bureau or other state agencies and departments to submit reports to the Legislature on the results of those studies funded by this tax by January 1, 2020, and every 2 years thereafter.
This bill, except as provided, would become inoperative on January 1, 2018, if the Secretary of State Initiative Number 1762, also known as the Control, Regulate and Tax Adult Use of Marijuana Act, is approved by the voters at the November 8, 2016, statewide general election and takes effect.
By expanding the application of the Fee Collection Procedures Law, which imposes criminal penalties for various acts, this bill would impose a state-mandated local program.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
This bill would include a change in state statute that would result in a taxpayer paying a higher tax within the meaning of Section 3 of Article XIII A of the California Constitution, and thus would require for passage the approval of 2⁄3 of the membership of each house of the Legislature.end delete
Vote: 2⁄3. Appropriation: yes. Fiscal committee: yes. State-mandated local program: yes.
The people of the State of California do enact as follows:
Part 13.5 (commencing with Section 31001) is
2added to Division 2 of the Revenue and Taxation Code, to read:
This part shall be known and may be cited as the
9Medical Cannabis Tax Law.
As used in this part, the following terms have the
12(a) “Board” means the State Board of Equalization.
13(b) “Cannabis” has the same meaning as that term is defined in
14Section 19300.5 of the Business and Professions Code.
15(c) “Cultivator” means a person subject to licensing as a
16cultivator for purposes of the Medical Marijuana Regulation and
17Safety Act (Chapter 3.5 (commencing with Section 19300) of
18Division 8 of the Business and Professions Code).
19(d) “Distribution” means all of the following:
20(1) The sale of untaxed medical cannabis flowers, medical
21cannabis leaves, and immature medical cannabis plants in this
23(2) The use or consumption of untaxed medical cannabis
24flowers, medical cannabis leaves, and immature medical cannabis
25plants in this state.
26(3) The placing in this state of untaxed medical cannabis flowers,
27medical cannabis leaves, or immature medical cannabis plants in
28retail stock for the purpose of selling the medical cannabis flowers,
29medical cannabis leaves, or immature medical cannabis plants.
30(e) “Distributor” has the same meaning as that term is defined
31in Section 19300.5 of the Business and Professions Code.
32(f) “Immature medical cannabis plant” means a plant described
33in subdivision (b) with no observable flowers or buds, that is
34intended to be sold for use by medical cannabis patients in
35California pursuant to the Compassionate Use Act of 1996
P4 1(Proposition 215), found in Section 11362.5 of the Health and
3(g) “Medical cannabis flowers” means the flowers of a plant
4described in subdivision (b), which excludes the leaves and stems,
5that are intended to be sold for use by medical cannabis patients
6in California pursuant to the Compassionate Use Act of 1996
7(Proposition 215), found in Section 11362.5 of the Health and
9(h) “Medical cannabis leaves” means all parts of a plant
10described in subdivision (b), other than cannabis flowers, that are
11intended to be sold for use by medical cannabis patients in
12California pursuant to the Compassionate Use Act of 1996
13(Proposition 215), found in Section 11362.5 of the Health and
15(i) “Medical cannabis product” means “medical cannabis” as
16defined in Section 19300.5 of the Business and Professions Code.
17(j) “Qualified nonprofit organization” means an organization
18exempt from tax as an organization described in Section 501(c)(3)
19of the Internal Revenue Code.
20(k) “Person” includes any individual, firm, partnership, joint
21venture, limited liability company, association, social club, fraternal
22organization, corporation, estate, trust, business trust, receiver,
23 assignee for the benefit of creditors, trustee, trustee in bankruptcy,
24syndicate, or any other group or combination acting as a unit.
25(l) “Sale” means the transfer of title or possession for
26consideration in any manner or by any means whatever.
27(m) “Use” includes the exercise of any right or power over
28medical cannabis flowers, medical cannabis leaves, and immature
29medical cannabis plants, except that it does not include the sale of
30medical cannabis flowers, medical cannabis leaves, and immature
31medical cannabis plants in the regular course of business. “Use”
32includes a withdrawal of medical cannabis flowers, medical
33cannabis leaves, and immature medical cannabis plants from
34inventory and use in the manufacture of a medical cannabis
(a) On and after the operative date set forth in Section
4031030, for the privilege of distributing medical cannabis flowers,
P5 1medical cannabis leaves, and immature medical cannabis plants,
2 every distributor shall pay a tax upon any distribution of medical
3cannabis flowers, medical cannabis leaves, and immature medical
4cannabis plants at the following rates:
5(1) Nine dollars and twenty-five cents ($9.25) per ounce of
6medical cannabis flowers.
7(2) Two dollars and seventy-five cents ($2.75) per ounce of
8medical cannabis leaves.
9(3) One dollar and twenty-five cents ($1.25) per immature
10medical cannabis plant.
11(b) The rates of tax imposed by this section shall apply
12proportionately to quantities of less than one ounce.
13(c) The tax imposed by this part shall not apply
to the sale of
14medical cannabis flowers, medical cannabis leaves, and immature
15medical cannabis plants by a cultivator to the distributor.
The board may prescribe by regulation a method and
17manner for payment of the tax imposed by this part that utilizes
18tax stamps or state-issued product bags that indicate that all
19required tax has been paid on the distribution of the medical
20cannabis flowers, medical cannabis leaves, and immature medical
21cannabis plants to which the tax stamp is affixed or in which the
22medical cannabis flowers, medical cannabis leaves, and immature
23medical cannabis plants are packaged.
The Legislative Analyst’s Office shall regularly review
25the tax levels established under this part, at a minimum of every
26other year, beginning in 2020, and make recommendations to the
27Legislature, as appropriate, regarding adjustments that would
28further the goal of addressing public safety and the environmental
29impacts caused by the proliferation of cannabis cultivation.
The board shall administer and collect the tax imposed
34by this part pursuant to the Fee Collection Procedures Law (Part
3530 (commencing with Section 55001)), except that Article 1.1
36(commencing with Section 55050) of Chapter 3 of Part 30 shall
37not apply. For purposes of this part, the references in the Fee
38Collection Procedures Law to “fee” shall include the tax imposed
39by this part, and references to “feepayer” shall include a person
40required to pay the tax imposed by this part.
(a) The board may prescribe, adopt, and enforce
2regulations relating to the implementation, administration, and
3enforcement of this part, including, but not limited to, applicant
4requirements, collections, reporting, refunds, and appeals.
5(b) The board may prescribe, adopt, and enforce any emergency
6regulations as necessary to implement this part. Any emergency
7regulation prescribed, adopted, or enforced pursuant to this section
8shall be adopted in accordance with Chapter 3.5 (commencing
9with Section 11340) of Part 1 of Division 3 of Title 2 of the
10Government Code, and, for purposes of that chapter, including
11Section 11349.6 of the Government Code, the adoption of the
12regulation is an emergency and shall be considered by the Office
13of Administrative Law as necessary for the immediate preservation
14of the public peace, health and safety, and general welfare.
(a) The tax is due and payable to the board quarterly
16on or before the last day of the month following each calendar
18(b) On or before the last day of the month following each
19calendar quarter, a return for the preceding calendar quarter shall
20be filed with the board using electronic media.
21(c) Returns shall be authenticated in a form or pursuant to
22methods as may be prescribed by the board.
(a) A distributor required to pay the tax imposed
24under this part shall register for a permit with the board. Every
25application for registration shall be made in a form prescribed by
26the board and shall set forth the name under which the applicant
27transacts or intends to transact business, the location of the
28distributor’s place or places of business, and any other information
29that the board may require. An application for registration shall
30be authenticated in a form or pursuant to methods as may be
31prescribed by the board.
32(b) The board shall grant and issue to each applicant that
33complies with subdivision (a) a separate permit for each place of
34business within the state.
35(c) A permit issued pursuant to this section is not assignable
36and is valid only for the person in whose name it is issued and for
37the transaction of business at the place designated therein. It shall
38at all times be conspicuously displayed at the place for which it is
Whenever any distributor fails to comply with any
2provision of this part or any rule or regulation of the board
3prescribed and adopted under this part, the board upon hearing,
4after giving the distributor at least 10 days’ notice in writing
5specifying the time and place of the hearing and requiring the
6distributor to show cause why the permit should not be suspended
7or revoked, may suspend or revoke the permit held by the
8distributor. The board shall give to the distributor written notice
9of the suspension or revocation of any of the distributor’s permits.
10The notices herein required may be served personally or by mail
11in the manner prescribed for service of notice of a deficiency
12determination. The board shall not issue a new permit after the
13revocation of a permit unless it is satisfied that the former holder
14of the permit will comply with the provisions of this part and the
15regulations of the board prescribed and adopted under this part.
(a) The Cannabis Production and Environment
17Mitigation Fund is hereby created in the State Treasury. All taxes,
18interest, penalties, and other amounts collected and paid to the
19board pursuant to this part, less payments of refunds and costs of
20administration, shall be deposited in the fund.
21(b) Notwithstanding Section 13340 of the Government Code,
22all moneys deposited in the Cannabis Production and Environment
23Mitigation Fund are hereby continuously appropriated, without
24regard to fiscal years, in the following manner:
25(1) Thirty percent to the Board of State and Community
26Corrections for disbursement for local law enforcement-related
27activities pertaining to illegal cannabis cultivation. Funds allocated
28pursuant to this paragraph shall be allocated on a competitive grant
29application process administered by the Board of State and
30Community Corrections. Applicants may include local entities
31that support enforcement activities related to unpermitted activity.
32The Board of State and Community Corrections shall promulgate
33guidelines for the grant process as soon as administratively
35(2) Thirty percent to the Natural Resources Agency to fund a
36competitive grant program for environmental cleanup restoration
37and protection of public and private lands that have been damaged
38by illegal cannabis cultivation. Where appropriate, the agency may
39administer funds using programs established pursuant to Chapter
403.8 (commencing with Section 5750) of Division 5 of the Public
P8 1Resources Code and described in subdivision (a) and paragraph
2(1) of subdivision (l) of Section 75050 of the Public Resources
3Code. Funds allocated pursuant to this paragraph shall be
4prioritized to restoration and cleanup projects, on public or private
5lands, based on the level of damages that have occurred. Not less
6than 35 percent of the funds shall be used for these purposes related
7to public lands, including, but not limited to, parks managed by
8the Department of Parks and Recreation, and not less than 20
9percent of the funds shall be used for these purposes related to
10private lands. The agency shall consult and partner with counties,
11cities, or cities and counties and may partner with qualified
12nonprofit organizations, other appropriate state agencies, and the
13appropriate federal entities, including, but not limited to, the United
14States Department of Agriculture and the United States Department
15of the Interior, for the purposes of awarding grants to state or local
16government entities and qualified nonprofit organizations that
17engage in environmental cleanup and restoration. The agency shall
18promulgate guidelines for the grant process as soon as
20(3) Thirty percent to the multiagency task force, the Department
21of Fish and Wildlife and the State Water Resources Control Board,
22to address the environmental impacts of cannabis cultivation on
23public and private lands in California and fund other state
24enforcement-related activities pertaining to illegal cannabis
26(4) Ten percent to the Bureau of Medical Marijuana Regulation,
27and other state agencies or departments that the bureau determines
28is appropriate, to conduct ongoing studies of areas that may create
29challenges to compliance of the Medical Marijuana Regulation
30Safety Act (Chapter 3.5 (commencing with Section 19300) of
31Division 8 of the Business and Professions Code), including, but
32not limited to, financial transactions, allowable tax deductions,
33and the public safety implications of a cash industry. The bureau
34or other state agencies or departments shall prepare reports on the
35results of those studies and submit those reports to the Legislature,
36in compliance with Section 9795 of the Government Code, on or
37before January 1, 2020, and on or before January 1 every two years
(a) The board shall submit a report to the Legislature
5on the total amount of revenue that was collected for the two-year
6period commencing on the operative date of this part. The report
7is due to the Legislature on or before the last day of the month
8commencing 180 days after the two-year period commencing on
9the operative date of this part.
10(b) The report required by this section shall be submitted in
11compliance with Section 9795 of the Government Code.
This part shall become operative on or after the first
16day of the first calendar quarter commencing more than 270 days
17after adequate funding has been received by the board to implement
18and administer this part. The board shall post a notice on its Internet
19Web site when this condition has been satisfied.
Funds for the establishment and support of the activities
21required pursuant to this part shall be advanced as a General Fund
22or special fund loan, and shall be repaid by the board from the
23initial proceeds from taxes collected pursuant to this part, no later
24than six months after the operative date specified in Section 31030.
(a) Except as provided in subdivision (b), this part shall
26become inoperative on January 1, 2018, if the Secretary of State
27Initiative Number 1762, also known as the Control, Regulate and
28Tax Adult Use of Marijuana Act, is approved by the voters at the
29November 8, 2016, statewide general election and takes effect.
30(b) The provisions of this part relating to the collection of the
31tax, refunds, allowance for credits, disposition of moneys deposited
32into the Cannabis Production and Environment Mitigation Fund,
33and the commencement of an action or proceeding shall remain
34operative with respect to taxes for which the liability accrued before
35January 1, 2018.
The tax shall be in addition to, and shall not limit, any
40taxes or fees imposed by a county or city and county.
No reimbursement is required by this act pursuant to
2Section 6 of Article XIII B of the California Constitution because
3the only costs that may be incurred by a local agency or school
4district will be incurred because this act creates a new crime or
5infraction, eliminates a crime or infraction, or changes the penalty
6for a crime or infraction, within the meaning of Section 17556 of
7the Government Code, or changes the definition of a crime within
8the meaning of Section 6 of Article XIII B of the California