Change in Excise Tax Obligation for Sales of Cannabis
Beginning January 1, 2023, cannabis retailers will be responsible for collecting and paying the cannabis excise tax to the California Department of Tax and Fee Administration (CDTFA). The new application of tax is a departure from the previous application of tax in which the distributor was responsible for remitting both the cultivator and the distributor excise taxes. Under the new law, a 15% cannabis excise tax will be applied to the gross receipts of the retail sale of cannabis and retailers will now be required to obtain a cannabis retailer’s license which will create a requirement for them to report [...]
Once Again, California’s Sales Tax Administrators Try to Avoid Transparency
Most organizations, whether private or public, would prefer to avoid transparency. At best, allowing the public to review internal policies, procedures, and self-justification is tedious and time-consuming. At worst (from the organization’s viewpoint), transparency can shine a light on incompetence, faulty reasoning, unjustifiable processes, and, occasionally, outright corruption. The agencies administering California’s sales and use tax program have shown a particular distaste for transparency. For decades the original agency, the California State Board of Equalization (BOE), refused to disclose the cases and documents underlying its regulatory interpretations, until it finally was forced to do so by a state appellate court. [...]
Building for Uncle Sam
How Sales & Use Tax Applies to Construction Contracts with the United States Government Generally speaking, the United States Government is immune from state taxation under the Supremacy Clause of the United States Constitution. Courts have ruled that states are precluded from taxing activities where the incidence of tax falls directly upon the federal government, its agencies, and instrumentalities. But what about construction contracts with the federal government where the contractor is the party that is providing and installing items on behalf of the federal government? This article uses California as an example to briefly explain how tax applies to [...]
Tricks of the Trade
Understanding How Sales and Use Tax Applies to Cabinet Contractors in California Can Save You a Bundle of Tax Sales and use tax rules for the construction industry are complex. Generally speaking, California construction contractors are considered consumers of materials and retailers of fixtures. Consumers must pay sales or use tax on the costs of the items they “use,” and retailers owe tax on the sale price of the items they sell. Like many areas of taxation, however, the devil is in details. The application of tax may vary depending on the item being installed, the form of the contract [...]
California Department of Tax and Fee Administration Issues Special Notice L-778 and Revokes Special Notice L-698
In September 2020, the California Department of Tax and Fee Administration (CDTFA) revoked previously issued Special Notice L-698 by issuing Special Notice L-778. Special Notice L-698 was issued in August 2019 and it attempted to impose an excise tax collection requirement on licensed out-of-state tobacco distributors making sales to licensed tobacco wholesalers located in California. Special Notice L-698 was controversial when it was issued because the imposition of excise tax on out-of-state distributors required them to collect the excise tax on the non-discounted selling price to its wholesaler customers, contrary to historical practices. The California Cigarette and Tobacco Products Tax [...]