California Department of Tax and Fee Administration Reports
Cannabis Tax Revenues for the First Quarter of 2023

Sacramento – The California Department of Tax and Fee Administration (CDTFA) reported cannabis revenue today for the first quarter of 2023. As of May 16, 2023, total cannabis tax revenue from first-quarter returns is $216.2 million. This includes California's cannabis excise tax, which generated $104.3 million; and $111.9 million in sales tax revenue from cannabis businesses.

The first quarter figures are impacted by a number of factors. The total reported cannabis excise tax does not, for example, include $24.9 million in excise tax that retailers previously reported and paid to distributors in 2022.

Previously reported revenue for the fourth quarter of 2022 returns was revised to $248.5 million, including $128.4 million in cannabis excise tax, and $120.1 million in sales tax. Revisions to quarterly data result from amended and late returns and other tax return adjustments.

Since January 2018, total cannabis tax revenue to date is $4.9 billion, including $2.4 billion in cannabis excise tax and $1.9 billion in sales tax. That also includes $501.3 million in cultivation tax, which was eliminated July 1, 2022, as a result of cannabis tax reform legislation.

In 2023, retailers are required to collect, report, and pay the cannabis excise tax, with the first return and payment due May 1, 2023. Since retailers may have already paid the cannabis excise tax to distributors during the previous tax structure in effect in 2022, retailers may claim a credit for the cannabis excise tax paid to a distributor before January 1, 2023.

The total reported cannabis tax revenues do not include outstanding returns or returns that are still being processed. They also do not include locally imposed taxes collected by cities and counties.

Additional cannabis tax revenue data is available on the CDTFA Open Data Portal.

Background:

In November 2016, California voters approved Proposition 64, the Control, Regulate, and Tax Adult Use of Marijuana Act. On January 1, 2018, two new cannabis taxes went into effect: a cultivation tax on all harvested cannabis that enters the commercial market and a 15 percent cannabis excise tax upon purchasers of cannabis and cannabis products. The cultivation tax no longer applies to cannabis or cannabis products starting July 1, 2022.

Since January 1, 2023, distributors (including microbusinesses that distribute cannabis) are no longer responsible for collecting and paying the cannabis excise tax to CDTFA for cannabis or cannabis products sold or transferred to cannabis retailers. Cannabis retailers must register for a cannabis retailer excise tax permit and are now responsible for reporting and paying the cannabis excise tax to CDTFA for sales transactions of cannabis and cannabis products.

Retail sales of cannabis and cannabis products remain subject to state and local sales tax. Sales tax applies to sales of cannabis, cannabis products, and other merchandise such as pipes, rolling papers, and shirts. Certain retail sales of medicinal cannabis are exempt from sales and use taxes when the purchaser holds a valid Medical Marijuana Identification Card issued by the California Department of Public Health.

Beginning January 1, 2023, cannabis retailers that have been approved by the DCC to receive an equity fee waiver for the issuance or renewal of their cannabis retailer license can apply with CDTFA for vendor compensation. Eligible cannabis retailers may be approved to retain 20 percent of the cannabis excise tax due on their retail sales of cannabis or cannabis products. A cannabis retailer must be approved by CDTFA before they can retain the excise tax due as vendor compensation. Approved retailers are eligible to begin claiming the credit April 1, 2023. The vendor compensation program will end on December 31, 2025.

To learn more, visit the Tax Guide for Cannabis Businesses on the CDTFA website.

The California Department of Tax and Fee Administration (CDTFA) administers California's sales and use, fuel, tobacco, alcohol, cannabis taxes, and various other taxes and fees that fund specific state programs. CDTFA-administered programs accounted for more than $94 billion last fiscal year, supporting essential local services such as transportation, public safety and health, libraries, schools, social services, and natural resource management programs through the distribution of tax dollars going directly to local communities.