www.benzinga.com Open in urlscan Pro
151.101.66.137  Public Scan

URL: https://www.benzinga.com/amp/content/36510382
Submission: On January 06 via api from US — Scanned from DE

Form analysis 1 forms found in the DOM

POST

<form
  action-xhr="//api/campaigns/amp/hubspot?formGuid=67d78984-a2b2-46de-bebc-76f5255c5d60&amp;pageTitle=California%20Cannabis%20Retailers%20Overpaying%20Tax%20On%20Items%20Not%20Legally%20Subject%20To%20It%2C%20New%20Lawsuit%20Claims&amp;pageUrl=https%3A%2F%2Fwww.benzinga%2Famp%2Fcontent%2F36510382&amp;portalId=2786381"
  class="amp-hubspot-form__form i-amphtml-form" enctype="application/x-www-form-urlencoded" method="post" target="_top" novalidate="">
  <div class="amp-hubspot-form__form-content"><label class="amp-hubspot-form__form-field"><input class="amp-hubspot-form__form-input" name="email" placeholder="Email" required="" type="email"></label><input
      class="amp-hubspot-form__form-submit amp-hubspot-form__form-submit--loading" disabled="" type="submit" value="Submitting..."><input class="amp-hubspot-form__form-submit" type="submit" value="Submit"></div>
  <div class="amp-hubspot-form__form-status">
    <div submit-success=""> <template type="amp-mustache"> {{message}} </template> </div>
    <div submit-error=""> <template type="amp-mustache"> {{message}} </template> </div>
  </div>
</form>

Text Content

CALIFORNIA CANNABIS RETAILERS OVERPAYING TAX ON ITEMS NOT LEGALLY SUBJECT TO IT,
NEW LAWSUIT CLAIMS

by nina@benzinga.com

January 5, 2024 9:41 AM | 4 min read



--------------------------------------------------------------------------------

"START 2024 STRONG WITH 3 HOT STOCK IDEAS - PRACTICALLY FREE"

Ready for your shot at the next potential 32%, 39% or 45% gains in today's
market? You're about to miss Stock Expert Gianni Di Poce's 3 latest stock
ideas... Ones that could shift your entire wealth-building journey. If you're
ready to start 2024 strong with 12 hot stock ideas every single month. ACT FAST.

--------------------------------------------------------------------------------

A marijuana company recently filed a lawsuit against the California Department
of Tax and Fee Administration (CDTFA) and the state's Office of Administrative
Law (OAL) alleging "massive overcollection of cannabis excise tax on items that
legally are not subject to excise taxation."

In the third quarter of 2023, California cannabis taxes yielded $269.3 million,
out of which excise tax generated $156.9 million, and the remaining $112.4
million came from sales tax. Since 2018, the state's cannabis taxes brought
almost $3 billion in state revenue.


ENTER TO WIN $500 IN STOCK OR CRYPTO

Enter your email and you'll also get Benzinga's ultimate morning update AND a
free $30 gift card and more!

{{message}}
{{message}}

Now, HNHPC Inc., which operates one of Catalyst Cannabis Co.'s 26 dispensaries
in California is challenging the legality of imposing an excise tax on "cannabis
accessories." The case will be heard in the Superior Court of California, Orange
County, reported Cannabis Business Times.

The lawsuit can be summarized with the following example: if a vape pen is sold
for $40 but only contains $5 worth of marijuana oil, should the 15% state excise
tax apply to the whole purchase?

"That's really what the argument's going to be about," Anthony Almaz, counsel
for Catalyst, told the outlet. "What's really taxable in California?"


EMERGENCY REGULATORY ACTION

Is this excise tax new in the state?

The issue is somewhat complex, as last November the CDTFA approved an emergency
regulatory action that requires dispensaries to collect excise tax not only on
marijuana flower and products like concentrates, edibles and topicals, already
included in the law, but also on what is called "optional" tangible personal
property (TPP). OAL adopted the action in December and it is expected to last
for two years.

Almaz argues that the optional TPP is a way for the CDFTA to impose excise taxes
on marijuana accessories that have been otherwise excluded, until now.

How does this apply to the above example? For a $40 vape pen with just $5 of
cannabis oil, the difference is $6 in excise taxes on the entire purchase and 75
cents in excise taxes on just the oil.

Catalyst has been explaining its retail charges on sales receipts for marijuana
and non-marijuana items to enable customers to pay excise tax only on actual
marijuana products, or the hypothetical 75 cents in the above example.


THE TAX LAW IS THE SAME

--------------------------------------------------------------------------------

BEFORE YOU DO ANOTHER THING, INVEST IN YOUR FUTURE WITH OPTIONS

Want to become an options master? In his special 90% discount, Nic Chahine will
give you full access to his top options plays, including strategies he's used to
bag two-digit winners. Learn Nic's time-tested strategies ASAP. Buy here for
only $0.99.

--------------------------------------------------------------------------------

"Nothing really changed in terms of the language of the tax law," Almaz said.
"So, the way we looked at it was, ‘OK, so long as now we separately stated on
the invoice to the customer instead of the retailer, it should be the same
result." According to him, Catalyst was not using a loophole in the law, it was
just the way the company interpreted it for a year.

"We want to make that part clear," Almaz continued, "because the tax authorities
back in 2019 came out with the regulation that says, ‘Listen, cannabis
accessories are not subject to the excise tax so long as they're separately
stated on the receipt and given to the purchaser.' … The tax law didn't change."



Now, the company is arguing that the CDFTA had no authority to enact this
regulation and even if it did have the authority, it was not allowed to because
it violates the APA.

"When the CDTFA learned HNHPC and the other Catalyst-branded dispensaries had
found a way to separately state cannabis accessories, thereby exempting them
from excise taxation, Respondents engaged in a ‘mad scramble' to do anything and
everything possible to prevent them from continuing to do so and to dissuade
other retailers from even thinking of also doing so," the suit claims. "In
short, this action was made necessary by the CDTFA's legally improper ‘money
grab' in violation of (cannabis tax laws) and its own regulations."

CDTFA spokesperson Tully Lehman commented on the emergency rulemaking process
saying it "was used to expedite the clarification of RTC section 34011.2 and
intended to help retailers better understand the tax issues as soon as possible.
The emergency regulation will become permanent if CDTFA adopts the emergency
regulation through the normal rulemaking process.”


RACING AGAINST TIME

According to Almaz, CDTFA was in a rush because its emergency regulation
rulemaking power was nearing an end.

"When the OAL told them that the regulation did not satisfy the APA, what you're
supposed to do is withdraw it, amend the language, resubmit it to the public,
and then resubmit it to the OAL," he said. "But they would've run out of time. …
They blew the clock essentially."

The case is scheduled for a hearing on April 4.

Continue reading on Cannabis Business Times.

Related links:

Only 13 California Cannabis Labs Out Of 38 Qualify As State Cracks Down On Scams

Photo: Shutterstock




--------------------------------------------------------------------------------

"START 2024 STRONG WITH 3 HOT STOCK IDEAS - PRACTICALLY FREE"

Ready for your shot at the next potential 32%, 39% or 45% gains in today's
market? You're about to miss Stock Expert Gianni Di Poce's 3 latest stock
ideas... Ones that could shift your entire wealth-building journey. If you're
ready to start 2024 strong with 12 hot stock ideas every single month. ACT FAST.

--------------------------------------------------------------------------------

Posted In: CannabisNewsLegalCalifornia cannabisCatalyst Cannabis CoHNHPC Inc.

© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights
reserved.




POPULAR CHANNELS

 * PreMarket Prep
 * Press Releases
 * Analyst Ratings
 * News
 * Options
 * ETFs


TOOLS & FEATURES

 * Real Time Feed
 * Public RSS Feeds
 * Submit News Tips
 * Blog
 * Embeddable Finance Widgets & Tools
 * Benzinga Catalyst


PARTNERS & CONTRIBUTORS

 * Affiliate Program
 * Contributor Portal
 * Licensing & Syndication
 * Sponsored Content
 * Advertise With Us
 * Lead Generation & SEO


ABOUT BENZINGA

 * About Us
 * Careers
 * In The News
 * Events
 * Contact Us

 * Terms & Conditions
 * Do Not Sell My Personal Data/Privacy Policy
 * Disclaimer
 * Service Status
 * Sitemap

© 2024 Benzinga | All Rights Reserved