California cannabis laws are some of the most complex in the country. This is what you need to know about cannabis distribution in California.
California now has the largest legal cannabis market in the world with sales in excess of $3 billion.
That’s a huge number, but California hasn’t even scratched the surface of its potential yet (it is the world’s fifth largest economy, after all.)
As this already massive market grows, now is the ideal time to set up a cannabis business in California. The trouble is, California doesn’t make it easy. It is one of the trickiest markets to break into, with complex tax, legislative and compliance rules.
To help break it down, here is an overview of what you need to know about distributing cannabis in California. Additionally, here's our complete guide to selling cannabis in California.
Getting a License
You can't set up a cannabis distribution business in Calfornia without the proper licenses. You'll need approval from both the local government and the state.
Before you can apply for a state license, you need to get approval from your local government.
Whether this is even possible will depend on where you're planning to set up your business. County and city governments have the right to ban cannabis businesses in their jurisdiction, so you'll need to make sure that you choose an area where it's actually legal to operate.
Once you have approval from your local government, you can apply for your state seller's permit. To create the application, you need to provide a great deal of information, including the following:
• Driver's license
• Social security number
• Supplier details
• Accountant details
• Personal references
• California business entity number
• Projected sales per month
• Projected taxable sales per month
• Details of the products you'll be distributing
Once you've got your seller's permit, you'll then need to apply for a cannabis tax permit, as you'll be collecting tax from both cultivators and retailers.
A distributor, you're the middleman between the people that grow the cannabis and the people that sell it to the public.
The California Department of Tax and Fee Administration (CDTFA) requires you to collect tax from both ends and then pay it on to them. From the cultivators, you'll need to collect cannabis cultivation tax. This is based on the type of cannabis products that you're distributing.
Since January 1, 2020, the rates have been as follows:
• Cannabis flower: $9.65 per dry-weight ounce
• Cannabis leaves: $2.87 per dry-weight ounce
• Cannabis plants: $1.35 per ounce
You'll then also need to collect the cannabis excise tax from any retailers that you distribute to. The current excise tax rate is 15% of the average market price. This is calculated by adding a markup to the wholesale price. The markup is set by the CTDFA and is currently 80%.
Once you've collected all these taxes, you'll need to file a return and pay the tax due to the CDTFA.
Are You Thinking About Getting Into Cannabis Distribution?
As you can see, there are a lot of hurdles you need to clear if you want to set up a cannabis distribution in California. It's a lot more difficult than in some other states.
If you're looking for support to get your business up and running then you're in the right place. Headquarters is a one-stop-shop that helps cannabis companies enter the Californian market. We have expertise in everything from compliance, policy, legislation, marketing and distribution.
Get in touch to find out how we could help you navigate the minefield that is California cannabis law.