Current through Register 2024 Notice Reg. No. 12, March 22, 2024
(a)
Excess Cannabis Tax. For purposes of this regulation, "excess cannabis tax"
means any amount:
(1) A cannabis retailer
collected from a purchaser under the representation by the cannabis retailer
that it was cannabis excise tax, which was computed upon an amount that is not
subject to cannabis excise tax or was in excess of the amount of cannabis
excise tax required to be collected from the purchaser.
(2) A distributor collected from a cannabis
retailer under the representation by the distributor that it was cannabis
excise tax, which was computed upon an amount that is not subject to cannabis
excise tax or was in excess of the amount of cannabis excise tax required to be
collected from the cannabis retailer.
(3) A distributor or manufacturer collected
from a cultivator under the representation by the distributor or manufacturer
that it was cultivation tax, which was computed upon an amount that is not
subject to cultivation tax or was in excess of the amount of cultivation tax
required to be collected from the cultivator.
(4) A distributor or manufacturer collected
from a cultivator under the representation by the distributor or manufacturer
that it was cultivation tax, which was computed upon harvested cannabis or
harvested cannabis used to make cannabis products that did not enter the
commercial market on or before June 30, 2022.
(b) Debt for Unreturned Excess Cannabis Tax.
Any amount of excess cannabis tax that is not returned to the purchaser,
cannabis retailer, or cultivator that paid it constitutes a debt owed to this
state.
(c) Procedures for Cannabis
Retailers. When a cannabis retailer ascertains that they have collected excess
cannabis tax from a purchaser that has not been paid to the state, they should
refund the excess cannabis tax to the purchaser that paid it. If the cannabis
retailer is unable or chooses not to refund the excess cannabis tax to the
purchaser that paid it, then they shall report and remit it to the Department,
unless it was remitted to a distributor pursuant to Regulation 3700 prior to
January 30, 2023.
(d) Procedures
for Distributors and Manufacturers.
(1) When a
manufacturer ascertains that they collected excess cannabis tax from a
cultivator that has not been paid to the state, they should refund the excess
cannabis tax to the cultivator that paid it. If the manufacturer is unable or
chooses not to refund the excess cannabis tax to the cultivator that paid it,
then they shall notify the Department so it can collect the excess cannabis tax
from the manufacturer, unless the excess cannabis tax was transferred to a
distributor to report and remit to the Department pursuant to Regulation 3700
prior to January 30, 2023.
(2) When
a distributor ascertains that they collected excess cannabis tax from a
cultivator or cannabis retailer that has not been paid to the state, they
should refund the excess cannabis tax to the cultivator or cannabis retailer
that paid it. If the distributor is unable or chooses not to refund the excess
cannabis tax to the cultivator or cannabis retailer that paid it, then they
shall notify the Department so it can collect the excess cannabis tax from the
distributor, unless the distributor remitted the excess cannabis tax to the
Department on or before January 31, 2023.
(e) Determination for Excess Cannabis Tax.
When the Department ascertains that a cannabis retailer, distributor, or
manufacturer has collected excess cannabis tax that has not been paid to the
state, they will be afforded an opportunity to establish that it has been or
will be refunded to the purchaser, cannabis retailer, or cultivator that paid
it. If the cannabis retailer, distributor, or manufacturer fails or refuses to
refund the excess cannabis tax, the Department will issue a notice of
determination for the amount of the excess cannabis tax not previously refunded
or paid to the state.
(1) A cannabis
retailer, distributor, or manufacturer that disagrees with any item included in
a notice of determination for excess cannabis tax may file a petition for
redetermination with the Department within 30 days from the date that the
notice of determination was mailed in accordance with the procedures in article
2a of chapter 1 of division 5 (commencing with section
35005) of title 18 of the
California Code of Regulations. If a petition for redetermination is not filed
within the 30-day period, the amount determined to be due becomes final and
collectible at the expiration of that period.
(2) A timely filed petition for
redetermination shall be acknowledged and reviewed in accordance with articles
2a and 8 of chapter 1 of division 5 (commencing with section
35005) of title 18 of the
California Code of Regulations, and the amount determined to be due becomes
final and collectible 30 days after the Department's final decision on the
petition was mailed.
(f)
Evidence to Establish that Excess Cannabis Tax Has Been or Will be Refunded.
(1) A person may establish that excess
cannabis tax was refunded to a purchaser, cannabis retailer, or cultivator by
providing any type of record showing the refund that can be verified by audit,
such as a receipt, cancelled check, or books of account showing that credit has
been allowed the purchaser, cannabis retailer, or cultivator as an offset
against an existing indebtedness owed to the person making the
refund.
(2) To establish that
excess cannabis tax will be refunded to a purchaser, cannabis retailer, or
cultivator, the person must:
(A) Inform the
purchaser, cannabis retailer, or cultivator in writing that the excess cannabis
tax will be refunded to the purchaser, cannabis retailer, or cultivator or
that, at their option, they will be credited with such amount as an offset
against an existing indebtedness owed to the person making the refund;
and
(B) Obtain and retain for
verification by the Department an acknowledgement from the purchaser, cannabis
retailer, or cultivator that they received notice of the amount of indebtedness
of the person to the purchaser, cannabis retailer, or
cultivator.
(g)
Records. A cannabis retailer, distributor, or manufacturer shall maintain and
make available for examination on request by the Department or its authorized
representatives all records necessary to determine whether it owes excess
cannabis tax to the state. Such records include, but are not limited to:
(1) Books of account;
(2) Receipts, invoices, cash register tapes,
and other documents of original entry supporting the entries in the books of
account; and
(3) Schedules or
working papers used in connection with the preparation of tax returns and
reports.
1. New section
filed 1-30-2023 as an emergency; operative 1-30-2023 (Register 2023, No. 5).
This filing is a deemed emergency pursuant to Revenue and Taxation Code section
34013(e).
A Certificate of Compliance must be transmitted to OAL by 1-30-2025 or
emergency language will be repealed by operation of law on the following
day.
Note: Authority cited: Section
34013,
Revenue and Taxation Code. Reference: Sections
34011,
34012,
34012.3,
34012.5,
34013
and
34015,
Revenue and Taxation Code.
