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
begin delete flowers,end delete immature medical cannabis begin delete plants,end delete and medical cannabis product. 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, among other things, fund competitive grants for local law enforcement-related activities pertaining to illegal cannabis cultivation; to fund 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 Regional Marijuana Enforcement Officers.
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. This bill would repeal all of its provisions as of January 1, 2025.
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 declare that it is to take effect immediately as an urgency statute.
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 both of the following:
20(1) The sale of untaxed medical cannabis
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21 immature medical cannabis
begin delete plants,end delete and medical cannabis
22product in this state.
23(2) The use or consumption of untaxed medical cannabis
begin delete flowers,end delete immature medical cannabis begin delete plants,end delete and
25medical cannabis product in this state.
26(e) “Distributor” has the same meaning as that term is defined
27in Section 19300.5 of the Business and Professions Code.
28(f) “Immature medical cannabis plant” means a plant described
29in subdivision (b) with no observable flowers or buds, that is
30intended to be sold for use by medical cannabis patients in
31California pursuant to the Compassionate Use Act of 1996
32(Proposition 215), found in Section 11362.5 of the Health and
34(g) “Medical cannabis
begin delete flowers”end delete means the begin delete flowersend delete
35 of a plant described in subdivision (b), which excludes the
36leaves and stems, that are intended to be sold for use by medical
37cannabis patients in California pursuant to the Compassionate Use
P4 1Act of 1996 (Proposition 215), found in Section 11362.5 of the
2Health and Safety Code.
3(h) “Medical cannabis product” means “medical cannabis” as
4defined in Section 19300.5 of the Business and Professions Code.
5(i) “Qualified nonprofit organization” means an organization
6exempt from tax as an organization described in Section 501(c)(3)
7of the Internal Revenue Code.
8(j) “Person” includes any individual, firm, partnership, joint
9venture, limited liability company, association, social club, fraternal
10organization, corporation, estate, trust, business trust, receiver,
11assignee for the benefit of creditors, trustee, trustee in bankruptcy,
12syndicate, or any other group or combination acting as a unit.
13(k) “Sale” means the transfer of title or possession for
14consideration in any manner or by any means whatever.
15(l) “Use” includes the exercise of any right or power over
begin delete flowers,end delete
immature medical cannabis
begin delete plants,end delete and medical cannabis product except that it does not
18include the sale of medical cannabis
begin delete flowers,end delete immature
begin delete plants,end delete and medical cannabis product in
20the regular course of business. “Use” includes a withdrawal of
begin delete flowersend delete and immature medical cannabis
begin delete plantsend delete from inventory and use in the manufacture of a medical
(a) On and after the operative date set forth in Section
2831030, for the privilege of distributing medical cannabis
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29 immature medical cannabis
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30cannabis product every distributor shall pay a tax upon any
31distribution of medical cannabis
begin delete flowers,end delete immature medical
begin delete plants,end delete and medical cannabis product at the
34(1) ____ dollars ($____) per ounce of medical cannabis
begin delete flowersend delete
35 cultivated by a licensee with a Type 1, Type 1A, or Type
361B classification as described in Section 19300.7 of the Business
37and Professions Code.
38(2) Nine dollars and twenty-five cents ($9.25) per ounce of
begin delete flowersend delete cultivated by a licensee with a
P5 1Type 2, Type 2A, or Type 2B classification as described in Section
219300.7 of the Business and Professions Code.
3(3) ____ dollars ($____) per ounce of medical cannabis
begin delete flowersend delete
4 cultivated by a licensee with a Type 3, Type 3A, or Type
53B classification as described in Section 19300.7 of the Business
6and Professions Code.
7(4) One dollar and twenty-five cents ($1.25) per immature
8medical cannabis plant.
9(5) At the rate equivalent to the combined rate of taxes on the
10privilege of selling tangible personal property at retail in this state
11that are imposed by the Sales and Use Tax Law (Part 1
12(commencing with Section 6001) and the California Constitution,
13upon the wholesale cost of any medical cannabis product
14manufactured by a licensee with a Type 6 or Type 7 classification
15as described in Section 19300.7 of the Business and Professions
17(b) The rates of tax imposed by this section shall apply
18proportionately to quantities of less than one ounce.
19(c) The tax imposed by this part shall not apply to the sale of
begin delete flowersend delete and immature medical cannabis
begin delete plantsend delete by a cultivator to the distributor.
The board may prescribe by regulation a method and
23manner for payment of the tax imposed by this part that utilizes
24tax stamps or state-issued product bags that indicate that all
25required tax has been paid on the distribution of the medical
begin delete flowers,end delete immature medical cannabis begin delete plants,end delete
27 and medical cannabis product to which the tax stamp is affixed or
28in which the medical cannabis
begin delete flowers,end delete
begin delete plants,end delete and medical cannabis product are packaged.
The Legislative Analyst’s Office shall regularly review
31the tax levels established under this part, at a minimum of every
32other year, beginning in 2020, and make recommendations to the
33Legislature, as appropriate, regarding adjustments that would
34further the goal of addressing public safety and the environmental
35impacts caused by the proliferation of cannabis cultivation.
The board shall administer and collect the tax imposed
40by this part pursuant to the Fee Collection Procedures Law (Part
P6 130 (commencing with Section 55001)), except that Article 1.1
2(commencing with Section 55050) of Chapter 3 of Part 30 shall
3not apply. For purposes of this part, the references in the Fee
4Collection Procedures Law to “fee” shall include the tax imposed
5by this part, and references to “feepayer” shall include a person
6required to pay the tax imposed by this part.
(a) The board may prescribe, adopt, and enforce
8regulations relating to the implementation, administration, and
9enforcement of this part, including, but not limited to, applicant
10requirements, collections, reporting, refunds, and appeals.
11(b) The board may prescribe, adopt, and enforce any emergency
12regulations as necessary to implement this part. Any emergency
13regulation prescribed, adopted, or enforced pursuant to this section
14shall be adopted in accordance with Chapter 3.5 (commencing
15with Section 11340) of Part 1 of Division 3 of Title 2 of the
16Government Code, and, for purposes of that chapter, including
17Section 11349.6 of the Government Code, the adoption of the
18regulation is an emergency and shall be considered by the Office
19of Administrative Law as necessary for the immediate preservation
20of the public peace, health and safety, and general welfare.
(a) The tax is due and payable to the board quarterly
22on or before the last day of the month following each calendar
24(b) On or before the last day of the month following each
25calendar quarter, a return for the preceding calendar quarter shall
26be filed with the board using electronic media.
27(c) Returns shall be authenticated in a form or pursuant to
28methods as may be prescribed by the board.
(a) A distributor required to pay the tax imposed
30under this part shall register for a permit with the board. Every
31application for registration shall be made in a form prescribed by
32the board and shall set forth the name under which the applicant
33transacts or intends to transact business, the location of the
34distributor’s place or places of business, and any other information
35that the board may require. An application for registration shall
36be authenticated in a form or pursuant to methods as may be
37prescribed by the board.
38(b) The board shall grant and issue to each applicant that
39complies with subdivision (a) a separate permit for each place of
40business within the state.
P7 1(c) A permit issued pursuant to this section is not assignable
2and is valid only for the person in whose name it is issued and for
3the transaction of business at the place designated therein. It shall
4at all times be conspicuously displayed at the place for which it is
Whenever any distributor fails to comply with any
7provision of this part or any rule or regulation of the board
8prescribed and adopted under this part, the board upon hearing,
9after giving the distributor at least 10 days’ notice in writing
10specifying the time and place of the hearing and requiring the
11distributor to show cause why the permit should not be suspended
12or revoked, may suspend or revoke the permit held by the
13distributor. The board shall give to the distributor written notice
14of the suspension or revocation of any of the distributor’s permits.
15The notices herein required may be served personally or by mail
16in the manner prescribed for service of notice of a deficiency
17determination. The board shall not issue a new permit after the
18revocation of a permit unless it is satisfied that the former holder
19of the permit will comply with the provisions of this part and the
20regulations of the board prescribed and adopted under this part.
(a) The Cannabis Production and Environment
22Mitigation Fund is hereby created in the State Treasury. All taxes,
23interest, penalties, and other amounts collected and paid to the
24board pursuant to this part, less payments of refunds and costs of
25administration, shall be deposited in the fund.
26(b) Notwithstanding Section 13340 of the Government Code,
27all moneys deposited in the Cannabis Production and Environment
28Mitigation Fund are hereby continuously appropriated, without
29regard to fiscal years, in the following manner:
30(1) Thirty percent to the Board of State and Community
31Corrections for disbursement for local law enforcement-related
32activities pertaining to illegal cannabis cultivation. The Board of
33State and Community Corrections shall give priority of funds to
34applicants that demonstrate that the area within the applicant’s
35jurisdiction has a high rate of criminal activity from organized
36crime as defined by Section 186.2 of the Penal Code related to
37illegal cannabis cultivation. Funds allocated pursuant to this
38paragraph shall be allocated on a competitive grant application
39process administered by the Board of State and Community
40Corrections. Applicants may include local entities that support
P8 1enforcement activities related to unpermitted activity. The Board
2of State and Community Corrections shall promulgate guidelines
3for the grant process as soon as administratively possible.
4(2) Two percent to the Department of Justice to fund and create
5Regional Marijuana Enforcement Officers who shall coordinate
6enforcement efforts, related to illegal cannabis cultivation, between
7the Department of Fish and Wildlife’s Marijuana Enforcement
8Team, the Department of Justice’s Bureau of Narcotic
9Enforcement, the United States Drug Enforcement Administration,
10and local law enforcement. The Department of Justice shall
11prioritize creation of Regional Marijuana Enforcement Officers
12in counties that have demonstrated that the area within the county’s
13jurisdiction has a high rate of criminal activity from organized
14crime, as defined by Section 186.2 of the Penal Code, related to
15illegal cannabis cultivation.
16(3) Thirty percent to the Natural Resources Agency for
17environmental cleanup restoration and protection of public and
18private lands that have been damaged by illegal cannabis
19cultivation. Where appropriate, the agency may administer funds
20using competitive grant programs established pursuant to Chapter
213.8 (commencing with Section 5750) of Division 5 of the Public
22Resources Code and described in subdivision (a) and paragraph
23(1) of subdivision (l) of Section 75050 of the Public Resources
24Code. Funds allocated pursuant to this paragraph shall be
25prioritized to restoration and cleanup projects, on public or private
26lands, based on the level of damages that have occurred. Not less
27than 35 percent of the funds shall be used for these purposes related
28to public lands, including, but not limited to, parks managed by
29the Department of Parks and Recreation, and not less than 20
30percent of the funds shall be used for these purposes related to
31private lands. The agency shall consult and partner with counties,
32cities, or cities and counties and may partner with qualified
33nonprofit organizations, other appropriate state agencies, and the
34appropriate federal entities, including, but not limited to, the United
35States Department of Agriculture and the United States Department
36of the Interior, for the purposes of awarding grants to state or local
37government entities and qualified nonprofit organizations that
38engage in environmental cleanup and restoration. The agency shall
39promulgate guidelines for the grant process as soon as
40administratively possible. All funds appropriated pursuant to this
P9 1paragraph shall only be used for purposes that directly correlate
2to cleanup of damage caused by illegal cannabis cultivation and
3the restoration and protection of public or private lands by illegal
5(4) Eight percent to the Open Space Subvention Payment
6Account of the California Land Conservation Act of 1965 (Chapter
77 (commencing with Section 51200) of Part 1 of Division 1 of
8Title 5 of the Government Code). Administrative costs to the
9Department of Conservation shall be no more than the reasonable
10costs to administer the program and shall be no more than 0.5
11percent of the 8 percent.
12(5) Thirty percent to
begin delete the multiagency task force,end delete the Department
13of Fish and
begin delete Wildlifeend delete and the State Water Resources
begin delete Board,end delete to address the environmental impacts of
16cannabis cultivation on public and private lands in California and
17fund other state enforcement-related activities pertaining to illegal
(a) The board shall submit a report to the Legislature
23on the total amount of revenue that was collected for the two-year
24period commencing on the operative date of this part. The report
25is due to the Legislature on or before the last day of the month
26commencing 180 days after the two-year period commencing on
27the operative date of this part.
28(b) The report required by this section shall be submitted in
29compliance with Section 9795 of the Government Code.
This part shall become operative on or after the first
34day of the first calendar quarter commencing more than 270 days
35after adequate funding has been received by the board to implement
36and administer this part. The board shall post a notice on its Internet
37Web site when this condition has been satisfied.
Funds for the establishment and support of the activities
39required pursuant to this part shall be advanced as a General Fund
40or special fund loan, and shall be repaid by the board from the
P10 1initial proceeds from taxes collected pursuant to this part, no later
2than six months after the operative date specified in Section 31030.
(a) Except as provided in subdivision (b), this part shall
4become inoperative on January 1, 2018, if the Secretary of State
5Initiative Number 1762, also known as the Control, Regulate and
6Tax Adult Use of Marijuana Act, is approved by the voters at the
7November 8, 2016, statewide general election and takes effect.
8(b) The provisions of this part relating to the collection of the
9tax, refunds, allowance for credits, disposition of moneys deposited
10into the Cannabis Production and Environment Mitigation Fund,
11and the commencement of an action or proceeding shall remain
12operative with respect to taxes for which the liability accrued before
13January 1, 2018.
14(c) This part shall
remain in effect only until January 1, 2025,
15and as of that date is repealed.
The tax shall be in addition to, and shall not limit, any
20taxes or fees imposed by a county or city and county.
No reimbursement is required by this act pursuant to
22Section 6 of Article XIII B of the California Constitution because
23the only costs that may be incurred by a local agency or school
24district will be incurred because this act creates a new crime or
25infraction, eliminates a crime or infraction, or changes the penalty
26for a crime or infraction, within the meaning of Section 17556 of
27the Government Code, or changes the definition of a crime within
28the meaning of Section 6 of Article XIII B of the California
This act is an urgency statute necessary for the
31immediate preservation of the public peace, health, or safety within
32the meaning of Article IV of the Constitution and shall go into
33immediate effect. The facts constituting the necessity are:
34In order to address the damage done by illegal cannabis
35cultivation at the earliest time possible, it is necessary that this act
36take effect immediately.