AB 1741 Will Remove Cannabis Tax Penalty

Thursday, January 4, 2018

SACRAMENTO - Assemblymember Rob Bonta (D-Oakland) has introduced AB 1741 which will bring tax equity to the medical and adult-use cannabis industries.

AB 1741 will waive the 10 percent penalty fee imposed on cash payments for cultivation and excise taxes on both medical and adult-use cannabis and waive the penalty for sales and use taxes on adult-use cannabis.

Previous legislation, AB 821, signed into law in 2016 removed the penalty on sales and use taxes of medical cannabis. But with Californians enacting Proposition 64, the law needs to be updated to reflect the new taxes created on both medical and adult-use cannabis markets.

“AB 1741 will create equity for taxpayers within the cannabis industry by removing an unfair penalty on cash tax payments made to the state,” Bonta said.

Currently, the State Department of Tax and Fee Administration (CDTFA) collects payments of over $10,000 from businesses via Electronic Funds Transfer (EFT) and imposes a 10 percent fee on all non-EFT payments.

“Because federal law classifies cannabis as a Schedule 1 drug, most bank and financial institutions do not allow cannabis businesses to open bank accounts. Therefore, most cannabis businesses have no choice but to operate and pay taxes in cash,” said Bonta.

“I have consistently been a champion for fair and transparent regulations within the cannabis industry and creating equity in the tax code is a key part of my mission on the Board of Equalization,” said Board of Equalization Member Fiona Ma, CPA and sponsor of AB 1741. “AB 1741, authored by my colleague and good friend, is necessary to create parity in the tax code for the cannabis industry. By expanding the same penalty fee waiver to adult-use cannabis that is currently offered to medical cannabis business owners, we are removing unnecessary and unfair barriers for those that simply want to be a part of California’s booming economy.”

“AB 1741 further incentivizes the cannabis industry to legally comply with California’s tax code, which in turn will generate more taxable revenue and further stimulate California’s economy,” Bonta said. 

The bill is also sponsored by the California Cannabis Industry Association.

Assemblymember Rob Bonta represents the 18th Assembly District, which includes Oakland, Alameda, and San Leandro and is the Assistant Majority Leader and Chair of the Asian Pacific Islander (API) Legislative Caucus.