Current through Register 1531, September 27, 2024
(1)
Scope of Regulation; Background; Outline of Topics; Effective
Date.
(a)
Scope of
Regulation. 830 CMR 64N.1.1 sets forth the rules for the
imposition of the marijuana retail taxes on the retail sale of
marijuana.
(b)
Background. Recent legislation, known as "An Act to
Ensure Safe Access to Marijuana," St. 2017, c. 55, authorized the licensing of
marijuana establishments, including marijuana retailers, and the retail sale of
marijuana. The legislation generally provides that all retail sales of
marijuana by marijuana retailers are subject to up to three taxes imposed on
the total sales price of the marijuana sold. First, marijuana retailers are
required to collect and remit a marijuana excise imposed on their retail sales
of marijuana. Second, marijuana retailers operating in cities or towns that
have accepted the marijuana local tax option must also collect the marijuana
local tax option at the rate imposed by the city or town, which may be set at a
rate of no greater than 3%.
See M.G.L. c. 64N. Third, sales of
marijuana are subject to the sales tax. However, the sale of medical marijuana,
as defined in
830
CMR 64N.1.1(2), is not
subject to any of these taxes.
830
CMR 64N.1.1 explains the imposition of the
marijuana retail taxes on retail sales of marijuana by marijuana retailers,
exemptions from these taxes, and administrative provisions under M.G.L. c. 62C
applicable to marijuana retailers, such as record keeping requirements and the
procedures for filing returns and remitting payments.
830 CMR 64N. 1.1 applies to all retail sales of marijuana by
marijuana retailers occurring on or after June 1, 2021.
(c)
Outline of
Topics.
830
CMR 64N.1.1 is organized as follows:
1. Scope of Regulation; Background; Outline
of Topics; Effective Date;
2.
Definitions;
3. Marijuana Retail
Taxes;
4. Sale and Delivery of
Marijuana to Consumers;
5. Separate
Statement Requirements for Marijuana Retailers;
6. Record Keeping;
7. Other Administrative Provisions.
(2)
Definitions. For the purposes of
830
CMR 64N.1.1, the following terms have the
following meanings:
Commissioner. The Commissioner of
Revenue or the Commissioner's duly authorized representative.
Marijuana. All parts of any plant of
the genus Cannabis, with certain exceptions, as defined in M.G.L. c. 94G,
§ 1. Marijuana also includes all "marijuana
products" as defined in M.G.L. c. 94G, § 1 and
935
CMR 500.002: Definitions.
Such marijuana products include edible products, beverages, topical products,
ointments, oils, and tinctures.
Marijuana Courier. As defined in
935
CMR 500.002: Definitions. A
Marijuana Courier is a marijuana establishment
licensed by the Cannabis Control Commission to make deliveries, but not sales,
of marijuana directly to consumers on behalf of a marijuana retailer. A
Marijuana Courier is not a marijuana retailer.
Marijuana Delivery Operator. As
defined in
935
CMR 500.002: Definitions. A
Marijuana Delivery Operator is a marijuana
establishment licensed by the Cannabis Control Commission to make sales and
deliveries of marijuana directly to consumers. A Marijuana Delivery
Operator is a marijuana retailer.
Marijuana Establishment. A
marijuana-related business licensed by the Cannabis Control Commission;
provided, however, that a medical marijuana treatment center or registered
marijuana dispensary shall be treated as a marijuana establishment for the
purposes of
830
CMR 64N.1.1.
Marijuana Establishment with a Delivery
Endorsement. As defined in
935
CMR 500.002: Definitions. A
Marijuana Establishment with a Delivery Endorsement is
a marijuana establishment that has received a "Delivery Endorsement," as
defined in
935
CMR 500.002, to make sales and deliveries of
marijuana directly to consumers. A Marijuana Establishment with a
Delivery Endorsement is a marijuana retailer.
Marijuana Excise. The excise imposed
pursuant to M.G.L. c. 64N, § 2.
Marijuana Local Tax Option. The local
tax option accepted by a city or town pursuant to M.G.L. c. 64N, §
3.
Marijuana Retail Taxes. Collectively,
the taxes imposed on retail sales of marijuana, including the marijuana excise,
the marijuana local tax option, and the sales tax.
Marijuana Retailer. A marijuana
establishment licensed by the Cannabis Control Commission to purchase, deliver,
sell, or otherwise transfer marijuana to consumers. A Marijuana
Retailer is a "vendor" as defined in M.G.L. c. 64H, § 1 and
M.G.L. c. 64I, § 1.
Medical Marijuana. Marijuana
authorized to be sold for medical use, as described in M.G.L. c. 94I.
Retail Sale. A sale of marijuana
subject to the marijuana retail taxes.
Sale. Any transfer of title or
possession of marijuana. Sale has the same general
meaning as the terms "sale" and "selling" as defined in M.G.L. c. 64H, §
1.
Sales Price. The total amount paid by
a purchaser to a marijuana retailer as consideration for a retail sale,
including any amount paid for services that are a part of the sale. Generally,
"sales price" has the same meaning as defined in M.G.L. c. 64H, §
1.
Sales Tax. The sales tax imposed
pursuant to M.G.L. c. 64H, § 2 or the use tax imposed pursuant to M.G.L.
c. 64I, § 2.
(3)
Marijuana Retail Taxes. Retail sales of marijuana are
subject to as many as three taxes: the marijuana excise, the marijuana local
tax option, and the sales tax.
830
CMR 64N.1.1(3) explains the
general applicability and rules governing the imposition of each tax.
(a)
Marijuana
Excise. In general, all sales of marijuana by a marijuana retailer
are retail sales subject to the marijuana excise. However, the following sales
of marijuana are not subject to the marijuana excise.
1.
Sales to a Marijuana
Establishment. The marijuana excise does not apply to the sale of
marijuana by a marijuana retailer to another marijuana establishment. To
qualify for this exclusion, a marijuana establishment purchasing marijuana from
a marijuana retailer must present its marijuana establishment license to the
marijuana retailer demonstrating that it is a marijuana establishment at the
time of sale.
2.
Sales
of Medical Marijuana. Sales of medical marijuana are exempt from
the marijuana excise. A purchaser must present his or her patient registration
card, as defined in
935
CMR 500.002: Definitions,
together with a valid government-issued identification card at the time of sale
in order to qualify for the exemption. A marijuana retailer must verify at the
time of sale that a purchaser is certified and registered with the Cannabis
Control Commission.
(b)
Marijuana Local Tax Option. In general, all retail
sales of marijuana by a marijuana retailer operating in a city or town that has
accepted the marijuana local tax option are subject to the marijuana local tax
option. The marijuana local tax option is imposed in the same manner as the
marijuana excise. Thus, marijuana is not subject to the marijuana local tax
option when sold to another marijuana establishment or when sold as medical
marijuana as described in
830
CMR 64N.1.1(3)(a). For the
purpose of determining the application of the marijuana local tax option,
marijuana retailers must source all retail sales of marijuana to the marijuana
retailer's host community, as defined in M.G.L. c. 94G, § 1.
(c)
Sales Tax. All
sales of marijuana by a marijuana establishment, regardless of whether it is a
marijuana retailer, are presumed to be retail sales subject to sales tax.
However, sales between marijuana establishments may qualify as sales for resale
or as exempt sales not subject to tax as explained in
830
CMR 64N.1.1(3).
1.
Sales for Resale.
A marijuana establishment selling marijuana to another marijuana establishment
bears the burden of proving that a sale is a sale for resale, unless it takes a
resale certificate (Form ST-4) from the purchasing marijuana establishment in
compliance with the good faith requirements outlined in M.G.L. c. 64H, §
8(b) and
830
CMR 64H.8.1: Resale and Exempt Use
Certificate. A marijuana establishment may not accept in good faith a
resale certificate presented by anyone other than a marijuana
establishment.
2.
Sales
Exempt from Sales Tax. In general, sales of marijuana may be
exempt from sales tax pursuant to M.G.L. c. 64H, § 6 only when the sale
meets one of the exemptions described in
830
CMR 64N.1.1(3)(c)2.a.
through c.
a.
Medical
Marijuana. Sales of medical marijuana to a qualifying patient or
the patient's personal caregiver that satisfy the requirements of
830
CMR 64N.1.1(3)(a)2. are
exempt from sales tax as prescription medication pursuant to M.G.L. c. 64H,
§ 6(l).
b.
Exempt
Use. Sales of marijuana may be exempt from sales tax pursuant to
M.G.L. c. 64H, § 6(r) when sold by a marijuana establishment to another
marijuana establishment as materials that have a useful life of less than one
year and which:
i. become an ingredient or
component part of tangible personal property to be sold;
ii. are consumed directly and exclusively in
an industrial plant in the actual manufacture of tangible personal property to
be sold;
iii. are consumed directly
and exclusively in agricultural production; or
iv. are consumed directly and exclusively in
research and development by a manufacturing corporation or a research and
development corporation within the meaning of M.G.L. c. 63, § 42B.
To substantiate these sales tax exemptions, the purchasing
marijuana establishment must present an exempt use certificate (Form ST-12) and
its marijuana establishment license to the selling marijuana establishment at
the time of sale. The burden of proving that the sale of marijuana is exempt
from tax is on the selling marijuana establishment, unless it takes an exempt
use certificate in good faith in accordance with M.G.L. c. 64H, § 8(f) and
830
CMR 64H.8.1(5). A marijuana
establishment may not accept in good faith an exempt use certificate presented
by anyone other than a marijuana establishment.
c.
Exempt Purchaser Marijuana
Establishments. Sales of marijuana to a marijuana establishment
that is exempt from taxation under IRC § 501(c)(3) and that intends to use
the marijuana in the conduct of its religious, charitable, educational, or
scientific enterprise may be exempt from sales tax. To claim this exemption,
the purchaser must present its valid Certificate of Exemption (Form ST-2),
Sales Tax Exempt Purchaser Certificate (Form ST-5), and its marijuana
establishment license to the selling marijuana establishment at the time of
sale. The selling marijuana establishment must retain both forms in the same
manner as other marijuana retail tax records in accordance with
830
CMR 62C.25.1:
Record
Retention and
830
CMR 64N.1.1(5).
Marijuana establishments must collect sales tax on all
transactions except as described in
830
CMR 64N.1.1(3)(c)2.
Marijuana establishments may be entitled to additional sales tax exemptions not
specified in
830
CMR 64N.1.1(3)(c)2.a.
through c. for purchases of non-marijuana tangible personal property that are
used for one of the exempt purposes described in M.G.L. c. 64H, §
6.
(4)
Sales and Deliveries of
Marijuana to Consumers. Marijuana establishments that are
authorized by the Cannabis Control Commission to sell and deliver marijuana
directly to consumers, including marijuana delivery operators and marijuana
establishments with a delivery endorsement, are marijuana retailers subject to
the registration, collection, and remittance requirements under 830 CMR 64N.
1.1. Marijuana establishments that merely deliver on behalf of a marijuana
retailer, and do not sell, marijuana to consumers, including marijuana
couriers, are not subject to the requirements under 830 CMR 64N. 1.1. The
following rules illustrate how the marijuana retail taxes apply to sales and
deliveries of marijuana to consumers:
(a)
Marijuana Sold and Delivered by Marijuana Delivery Operators and
Marijuana Establishments with a Delivery Endorsement. Marijuana
delivery operators and marijuana establishments with a delivery endorsement are
authorized to make sales and deliveries of marijuana directly to consumers and
are marijuana retailers. In a transaction where a marijuana delivery operator
or a marijuana establishment with a delivery endorsement sells and delivers
marijuana directly to a consumer, the marijuana delivery operator or marijuana
establishment with a delivery license is required to collect and remit the
marijuana retail taxes. Marijuana delivery operators and marijuana
establishments with a delivery endorsement must source sales and deliveries of
marijuana to their same host community in the same manner as described in
830
CMR 64N.1.1(3)(b) for
purposes of the marijuana local tax option.
(b)
Marijuana Delivered by
Marijuana Couriers. Marijuana couriers are authorized only to
deliver marijuana to consumers on behalf of a marijuana retailer and not to
sell marijuana directly to consumers. In a transaction where a marijuana
courier delivers marijuana directly to a consumer on behalf of a marijuana
retailer, the marijuana retailer, and not the marijuana courier, is required to
collect and remit the marijuana retail taxes. In such a transaction the
marijuana retailer must source such sales and deliveries of marijuana to the
same host community in the same manner as described in
830
CMR 64N.1.1(3)(b) for
purposes of the marijuana local tax option.
(5)
Separate Statement
Requirements for Marijuana Retailers.
(a)
General Rule.
All retail sales of marijuana by a marijuana retailer are subject to the
marijuana retail taxes, unless exempt as described in
830
CMR 64N.1.1(3), all of which
are imposed on the total sales price of the marijuana sold. All marijuana
retailers must separately state each of the marijuana retail taxes from the
total sales price of the marijuana on the receipt to the purchaser.
Marijuana retailers must also separately state the portion of
the sales price attributable to sales of marijuana and to sales of other goods
or services in amounts that reasonably reflect their retail value on the
receipt to the purchaser. If the marijuana retailer does not follow this
requirement, the marijuana retail taxes will be imposed on the total sales
price of the entire transaction. The Commissioner may review transactions
involving retail sales of marijuana that do not reasonably reflect the
marijuana's retail value pursuant to M.G.L. c. 62C, § 3A. Marijuana
retailers must separately report sales of marijuana and non-marijuana taxable
tangible personal property to the Commissioner.
(b)
Example.
Purchaser buys rolling papers, a t-shirt, and marijuana from marijuana retailer
that operates in a city or town that has accepted the marijuana local tax
option at the maximum rate of 3%. Marijuana retailer separately states the
sales price for the rolling papers, the t-shirt, and the marijuana on the
receipt to purchaser and reports the sales prices of the items as $5.00,
$20.00, and $100.00 respectively, which reasonably reflect their retail value.
The t-shirt is exempt from tax as an article of clothing pursuant to M.G.L. c.
64H, § 6(k). The application of tax is as follows:
|
Sales Price - Rolling Papers |
$5.00 |
|
Sales Tax (6.25%) |
$.31 |
|
Total Tax Imposed |
$.31 |
|
Total Charge - Rolling Papers |
$5.31 |
|
Sales Price - T-shirt |
$20.00 |
|
Total Tax Imposed |
$.00 |
|
Total Charge - T-shirt |
$20.00 |
|
Sales Price - Marijuana |
$100.00 |
|
Marijuana Excise (10.75%) |
$10.75 |
|
Marijuana Local Tax Option (3%) |
$3.00 |
|
Sales Tax (6.25%) |
$6.25 |
|
Total Tax Imposed |
$20.00 |
|
Total Charge - Marijuana |
$120.00 |
|
Transaction Total |
$145.31 |
When filing its tax returns, marijuana retailer must report the
total sales price of the rolling papers on its sales and use tax return and the
total sales price of the marijuana on its marijuana retail tax
return.
(6)
Record Keeping.
(a)
Records Relating to Transactions by a Marijuana
Retailer. Every marijuana retailer must maintain complete and
accurate records of the gross receipts and expenditures from all purchases and
sales, whether or not taxable, in accordance with
830
CMR 62C.25.1:
Record
Retention. In particular, every marijuana retailer must maintain:
1. a journal or its equivalent, which records
daily all non-cash transactions affecting accounts payable;
2. a cash journal or its equivalent, which
records daily all cash receipts and cash disbursements, including any check
transactions;
3. a sales slip,
invoice, cash register tape, or other document evidencing the original
transaction, which substantiates each entry in the journal or cash
journal;
4. memorandum accounts,
records or lists concerning inventories, fixed assets or prepaid items, except
in cases where the accounting system clearly records such information;
and
5. a ledger to which totals
from the journal, cash journal and other records have been periodically posted.
The ledger must clearly classify the individual accounts receivable and payable
and the capital account.
Marijuana retailers must provide such records to the
Commissioner upon request.
(b)
Records Related to
Transactions Between Marijuana Establishments. All records
reflecting transactions between marijuana establishments must be maintained,
including any Resale certificates, Marijuana Establishment Purchaser
certificates, and Exempt Use certificates.
(c)
Separate Record Keeping
Requirements for Sales of Tangible Personal Property. For record
keeping purposes, marijuana retailers selling both marijuana and taxable
non-marijuana tangible personal property must maintain records that separately
account for the two types of property.
(d)
Required Use of Point-of-sale
Systems. Marijuana retailers may only use point-of-sale (POS)
systems approved by the Cannabis Control Commission, in consultation with the
Commissioner. All POS systems utilized by a marijuana retailer must record all
transactions in a manner that will allow the Commissioner to verify gross
receipts from sales of marijuana and non-marijuana sales and to validate any
exempt sales. The manipulation of sales data recorded in a POS system through
any means is prohibited and will be subject to:
1. the tax evasion penalties of M.G.L. c.
62C, § 73, including a felony conviction;
2. a fine of not more than $100,000 or
$500,000 in the case of a corporation; or
3. by imprisonment by not more than five
years, or both, and payment of the cost of prosecution.
(e)
Other Records.
Marijuana retailers must retain copies of all marijuana retail tax returns, as
well as supporting data indicating how the figures in such returns were
calculated, in accordance with
830
CMR 62C.25.1(7).
(7)
Other
Administrative Provisions.
(a)
Registration. Marijuana retailers must register with
the Commissioner online using MassTaxConnect. As part of the registration
process, marijuana retailers must provide their marijuana establishment license
number. Once registered, marijuana retailers will be issued a Certificate of
Registration by the Commissioner. Certificates of Registration must be
displayed conspicuously in accordance with
830
CMR 62C.67.1: Display of Certificates
of Registration.
(b)
Filing Returns. Marijuana retailers are required to
file a marijuana retail tax return reporting all gross receipts from the retail
sale of marijuana with the Commissioner on a monthly basis using the form
prescribed. For tax periods beginning before April 1, 2021, returns are due on
or before the 20th day of the following calendar month. Effective for tax
periods ending on or after April 1, 2021, returns are due on or before the 30th
day of the following calendar month. All returns must be filed with the
Commissioner electronically.
(c)
Remitting Payment. Payments must be remitted to the
Commissioner electronically through MassTaxConnect on or before the due date of
the return. For tax periods ending on or after April 1, 2021, marijuana
retailers may also be subject to the advance payment rules in
830
CMR 62C.16B.1.
(d)
Amended
Returns/Abatement. A marijuana retailer seeking to increase or
decrease its previously reported tax may submit an amended return to the
Commissioner electronically through MassTaxConnect in accordance with
830
CMR 62C.26.2: Amended
Returns. A marijuana retailer seeking to obtain an abatement of a tax
or penalty assessed by the Commissioner may dispute it by filing an application
for abatement pursuant to
830
CMR 62C.37.1:
Abatements.
(e)
Assessments. The Commissioner may make an assessment
of tax and/or penalties in accordance with
830
CMR 62C.26.1: Assessments.
If the Commissioner determines from the verification of a return or otherwise
that more than the full amount of a marijuana retail tax has been paid or
assessed and paid, the Commissioner may make an overpayment determination in
accordance with
830
CMR 62C.26.1(17). The
Commissioner, as a matter of discretion, may apply an overpayment of a
marijuana retail tax against any unpaid amounts of any other tax due from the
marijuana retailer. The Commissioner may also apply an overpayment of a
marijuana retail tax to prior or subsequent tax periods.
(f)
Penalties.
Marijuana retailers that fail to file a return, file a return timely, pay the
marijuana retail taxes, or substantially understate the amount of tax due may
be subject to penalties under M.G.L. c. 62C. See
830
CMR 62C.33.1: Interest, Penalties,
and Application of Payments.
