Administration - Cannabis Tax - Revenue & Taxation - CA

Section § 34013

This law lays out the rules for administering and collecting taxes related to commercial cannabis activity in California. The Department of Tax and Fee Administration oversees tax collection and can impose regulations to ensure compliance, including potentially tagging products to show taxes have been paid.

If a cannabis business didn't pay taxes electronically between January 2022 and January 2023, they may not face penalties for that period. The department can enforce emergency regulations quickly until January 2024 to safeguard public welfare. Businesses failing to pay required taxes may face steep penalties or even lose their licenses. The department can also take legal action to recover unpaid taxes.

(a) The department shall administer and collect the taxes imposed by this part pursuant to the Fee Collection Procedures Law (Part 30 (commencing with Section 55001)). For purposes of this part, the references in the Fee Collection Procedures Law to “fee” shall include the taxes imposed by this part, and references to “feepayer” shall include a person required to pay or collect the taxes imposed by this part.

(b)

(1) A person licensed to engage in commercial cannabis activity under Division 10 (commencing with Section 26000) of the Business and Professions Code that failed to remit amounts due by means of electronic funds transfer on and after January 1, 2022, and before January 1, 2023, is not subject to or is relieved of any of the penalties imposed by Section 55050 for that failure.

(2) On or after January 1, 2022, subdivision (a) of Section 55050 shall not apply to a person required to pay or collect the taxes imposed by this part on a person licensed to engage in commercial cannabis activity under Division 10 (commencing with Section 26000) of the Business and Professions Code if the department deems it necessary to facilitate the collection of amounts due.

(c) The department may prescribe, adopt, and enforce regulations relating to the administration and enforcement of this part, including, but not limited to, collections, reporting, refunds, and appeals.

(d) The department shall adopt necessary rules and regulations to administer the taxes in this part. Such rules and regulations may include methods or procedures to tag cannabis or cannabis products, or the packages thereof, to designate prior tax payment.

(e) Until January 1, 2024, the department may prescribe, adopt, and enforce any emergency regulations as necessary to implement, administer, and enforce its duties under this division. Any emergency regulation prescribed, adopted, or enforced pursuant to this section shall be adopted in accordance with Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, and, for purposes of that chapter, including Section 11349.6 of the Government Code, the adoption of the regulation is an emergency and shall be considered by the Office of Administrative Law as necessary for the immediate preservation of the public peace, health and safety, and general welfare. Notwithstanding any other law, the emergency regulations adopted by the department may remain in effect for two years from adoption, and may be readopted in accordance with subdivision (h) of Section 11346.1 of the Government Code.

(f) Any person required to be licensed pursuant to Division 10 (commencing with Section 26000) of the Business and Professions Code who fails to pay the taxes imposed under this part shall, in addition to owing the taxes not paid, be subject to a penalty of at least one-half the amount of the taxes not paid, and shall be subject to having its license revoked pursuant to Section 26031 of the Business and Professions Code.

(g) The department may bring such legal actions as are necessary to collect any deficiency in the tax required to be paid, and, upon the department’s request, the Attorney General shall bring the actions.

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Section § 34013.1

This section allows the department to share specific information about businesses registered for the cannabis excise tax, including their name, city location, account number, and status. This information can be provided to state and local law enforcement if they request it in writing, but only for carrying out their official duties. Law enforcement agencies must follow privacy laws when using this information.

The term 'law enforcement agency' includes organizations like the California Highway Patrol and local police or sheriff departments that enforce cannabis laws. Additionally, the department can share this information with licensing authorities if they have a memorandum of understanding.

Notwithstanding Sections 7056 and 55381:

(a) The department may disclose the name, business name, business city location, account number, and account status of a person registered with the department for purposes of collecting and remitting the cannabis excise tax.

(b)

(1) Notwithstanding subdivision (a), the department shall, upon written request, provide to a state and local law enforcement agency any and all information collected by the department under this part regarding a person required by this part to collect and remit the cannabis excise tax and information collected under Part 1 (commencing with Section 6001). The state and local law enforcement agencies authorized by this subdivision shall only access and use this information to the extent necessary to carry out the functions and duties of that agency and the agency shall adhere to all state laws, policies, and regulations pertaining to the protection of personal information and individual privacy.

(2) For purposes of this section, “law enforcement agency” means the Department of the California Highway Patrol, a sheriff department, a police department, or a California state, city, county, or city and county agency or department designated by the governing body of that agency to enforce state cannabis laws or local cannabis ordinances and regulations.

(c) The department is authorized to share information obtained under this part and under Part 1 (commencing with Section 6001), with a licensing authority, pursuant to a memorandum of understanding, as deemed necessary by the department.

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Section § 34014

Until January 1, 2023, distributors of cannabis had to get a special permit from the department, and there was no fee. Starting January 1, 2023, cannabis retailers instead must obtain this permit and there's still no fee. Operating without a permit is a misdemeanor.

The department can also require businesses involved in cannabis like distributors, retailers, and others to provide financial security to cover tax liabilities, but they can waive this requirement if service providers are unavailable or unwilling to insure cannabis businesses.

When deciding the amount of security required, the department will consider any financial hardship this might create due to a lack of available surety providers.

(a)

(1) Until January 1, 2023, all distributors must obtain a separate permit from the department pursuant to regulations adopted by the department. No fee shall be charged to any person for issuance of the permit. Any person required to obtain a permit who engages in business as a distributor without a permit or after a permit has been canceled, suspended, or revoked, and each officer of any corporation that so engages in business, is guilty of a misdemeanor.

(2) On and after January 1, 2023, all cannabis retailers shall obtain a separate cannabis tax permit from the department pursuant to regulations adopted by the department. A fee shall not be charged to any person for issuance of the permit. Any person required to obtain a permit who engages in business as a cannabis retailer without a permit or after a permit has been canceled, suspended, or revoked, and each officer of any corporation that so engages in business, is guilty of a misdemeanor.

(b) The department may require every licensed distributor, retailer, cultivator, microbusiness, nonprofit, or other person required to be licensed, to provide security to cover the liability for taxes imposed by state law on cannabis produced or received by the retailer, cultivator, microbusiness, nonprofit, or other person required to be licensed in accordance with procedures to be established by the department. Notwithstanding anything herein to the contrary, the department may waive any security requirement it imposes for good cause, as determined by the department. “Good cause” includes, but is not limited to, the inability of a distributor, retailer, cultivator, microbusiness, nonprofit, or other person required to be licensed to obtain security due to a lack of service providers or the policies of service providers that prohibit service to a cannabis business.

(c) In fixing the amount of any security required by the department, the department shall give consideration to the financial hardship that may be imposed on licensees as a result of any shortage of available surety providers.

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Section § 34014.1

If someone doesn't follow the rules about the cannabis excise tax, or their seller’s or business license is suspended or revoked, the department can hold a hearing and decide to suspend or revoke their permits, after giving them a 10-day written notice. The decision and notice can be delivered in person or by mail. New permits won't be issued unless the person shows they will follow the tax rules and regulations.

If someone's permit was revoked or suspended, they'll have to pay a $100 fee to get a new one issued.

(a) Whenever any person fails to comply with any provision of this part relating to the cannabis excise tax or any rule or regulation of the department relating to the cannabis excise tax prescribed and adopted under this part, or when a person’s seller’s permit has been suspended or revoked under Part 1 (commencing with Section 6001), or when a person’s license has been suspended or revoked under Division 10 (commencing with Section 26000) of the Business and Professions Code, the department upon conducting a hearing, after giving the person 10 days’ notice in writing specifying the time and place of hearing and requiring the person to show cause why the person’s permit or permits should not be revoked, may revoke or suspend any one or more of the permits held by the person. The department shall give to the person written notice of the suspension or revocation of any of the person’s permits. The notices herein required may be served personally or by mail in the manner prescribed for service of notice of a deficiency determination under subdivision (d) of Section 55061 of the Revenue and Taxation Code. The department shall not issue a new permit after the revocation of a permit unless it is satisfied that the former holder of the permit will comply with the provisions of this part relating to the cannabis excise tax and the regulations of the department.

(b) A person whose permit has been previously suspended or revoked shall pay the department a new issuance fee of one hundred dollars ($100) for the reissuance of a permit.

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Section § 34015

This law mandates that cannabis retailers in California must pay their excise tax every three months and file a return electronically with the state's department by the end of the month after each quarter. It also allows the department to require those involved in the cannabis business, including cultivators and distributors, to file monthly reports on their inventory, sales, and other relevant details by the 25th of each month. The department can also check their books and records if needed. These rules started on January 1, 2023.

(a) Unless otherwise prescribed by the department, the cannabis excise tax imposed by Section 34011.2 is due and payable to the department quarterly on or before the last day of the month following each quarterly period of three months. On or before the last day of the month following each quarterly period, each cannabis retailer shall file a return for the preceding quarterly period with the department using electronic media prescribed by the department. Returns shall be authenticated in a form or pursuant to methods as may be prescribed by the department.

(b) The department may require every person engaged in the cultivation, distribution, manufacturing, or retail sale of cannabis or cannabis products, or any other person required to be licensed pursuant to Division 10 (commencing with Section 26000) of the Business and Professions Code to file, on or before the 25th day of each month, a report using electronic media prescribed by the department with respect to the person’s inventory, purchases, and sales during the preceding month and any other information as the department may require to carry out the purposes of this part. Reports shall be authenticated in a form or pursuant to methods as may be prescribed by the department.

(c) The department may examine the books and records of any person licensed, or required to be licensed, pursuant to Division 10 (commencing with Section 26000) of the Business and Professions Code, as it may deem necessary in carrying out this part.

(d) This section shall become operative on January 1, 2023.

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Section § 34015.1

This law targets unlicensed individuals dealing with cannabis sales without the necessary license. It holds them responsible for paying taxes and penalties as if they were licensed growers or buyers, with immediate payment required. If caught, they may face a penalty unless they can prove the failure to secure a license was reasonable. Providing false information to get out of a penalty can result in a misdemeanor, potentially leading to jail time or fines.

Additionally, any licensed cannabis business that fails to report sales accurately in the mandated tracking system, starting January 1, 2023, can be held liable for taxes as if they were the purchaser. This emphasizes honest reporting and compliance with the state's track and trace system for cannabis transactions.

(a)

(1) Any unlicensed person who is required to be licensed pursuant to Division 10 (commencing with Section 26000) of the Business and Professions Code and who possesses, keeps, stores, or retains for the purpose of sale, or sells or offers to sell any cannabis or cannabis products, shall be liable for the cultivation tax imposed pursuant to Section 34012 as if the person were the cultivator of the harvested cannabis and that cannabis entered the commercial market, the cannabis excise tax imposed pursuant to Section 34011 or 34011.2 as if the person were the purchaser of the cannabis or cannabis product in a retail sale from a cannabis retailer, and for applicable penalties and interest, if any, which shall become immediately due and payable.

(2)

(A) The department shall ascertain as best it may the category and amount of the harvested cannabis deemed as having entered the commercial market, and the average market price or gross receipts, based on any information within the department’s possession or that may come into its possession, of the retail sale of the cannabis or cannabis product deemed as purchased from a cannabis retailer, and shall determine immediately the tax on that amount, adding to the tax a penalty of 25 percent of the amount of tax or five hundred dollars ($500), whichever is greater, and shall give the unlicensed person notice of that determination in the same manner as prescribed for service of notice by Section 55061. However, if the department determines that the failure to secure a license was due to reasonable cause, the department may waive the penalty. Sections 55101 and 55102 shall be applicable with respect to the finality of the determination and the right of the person to petition for a redetermination.

(B) Any person seeking to be relieved of the penalty imposed pursuant to subparagraph (A) shall file with the department a signed statement setting forth the facts upon which they base the claim for relief. Any person who signs a statement pursuant to this section that asserts the truth of any material matter that they know to be false is guilty of a misdemeanor punishable by imprisonment of up to one year in the county jail, or a fine of not more than one thousand dollars ($1,000), or both the imprisonment and the fine.

(3) If the department believes that the collection of any amount of tax required to be paid by any person under this part will be jeopardized by delay, it may make a jeopardy determination pursuant to Article 4 (commencing with Section 55101) of Chapter 3 of Part 30.

(4) The department may collect the tax, penalty, and interest due from the person by seizure and sale of property in the manner prescribed for the collection pursuant to Section 55181.

(5) In the suit, a copy of the jeopardy determination certified by the department shall be prima facie evidence that the person is indebted to the state in the amount of the tax, penalties, and interest at the modified adjusted rate per month, or fraction thereof, established pursuant to Section 6591.5, from the date the amount, or any portion thereof, should have been reported until the date of payment.

(6) The foregoing remedies of the state are cumulative.

(7) No action taken pursuant to this section relieves the person in any way from the penal provisions of this part or the Fee Collection Procedures Law (Part 30 (commencing with Section 55001)).

(b) Any licensed person, on or after January 1, 2023, who sells or transfers to any person cannabis or cannabis products and who knowingly does not report or falsely reports that sale or transfer in the track and trace system required pursuant to Chapter 6.5 (commencing with Section 26067) of Division 10 of the Business and Professions Code or any regulations promulgated for purposes of that chapter, shall be, with respect to the cannabis or cannabis products knowingly not reported or falsely reported in the track and trace system, liable for the cannabis excise tax imposed pursuant to Section 34011 or 34011.2 as if the person were the purchaser of the cannabis or cannabis product in a retail sale from a cannabis retailer, and for applicable penalties and interest, if any, which shall become immediately due and payable.

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Section § 34015.2

This law states that if a corporation or similar business shuts down, anyone responsible for handling taxes—like officers or partners—could personally owe any unpaid taxes, plus interest and penalties, if they knowingly didn't pay them. This applies to taxes due while they were in charge. It specifically concerns cannabis excise and cultivation taxes. The government can collect these taxes like other tax debts, and they have up to three or eight years to notify the person responsible, depending on when they become aware of the business closure.

'Willfully' not paying taxes means the person knowingly chose not to pay them.

(a) Upon the termination, dissolution, or abandonment of the business of a corporation, partnership, limited partnership, limited liability partnership, or limited liability company, any officer, member, manager, partner, or other person having control or supervision of, or who is charged with the responsibility for the filing of returns or the payment of tax for, or who is under a duty to act for the corporation, partnership, limited partnership, limited liability partnership, or limited liability company in complying with any requirement of this part, shall, notwithstanding any provision in the Corporations Code to the contrary, be personally liable for any unpaid taxes and interest and penalties on those taxes, if the officer, member, manager, partner, or other person willfully fails to pay or to cause to be paid any taxes due from the corporation, partnership, limited partnership, limited liability partnership, or limited liability company pursuant to this part.

(b) The officer, member, manager, partner, or other person shall be liable only for taxes that became due during the period they had the control, supervision, responsibility, or duty to act for the corporation, partnership, limited partnership, limited liability partnership, or limited liability company described in subdivision (a), plus interest and penalties on those taxes.

(c) Personal liability may be imposed pursuant to this section only if the department can establish that the corporation, partnership, limited partnership, limited liability partnership, or limited liability company is required to collect the cannabis excise tax imposed pursuant to Section 34011 or 34011.2 or cultivation tax imposed pursuant to Section 34012 and that it failed to report and pay the tax.

(d) Except as provided in subdivision (e), the sum due for the liability under this section may be collected by determination and collection in the manner provided in Chapter 3 (commencing with Section 55040) and Chapter 4 (commencing with Section 55121) of Part 30.

(e) A notice of deficiency determination under this section shall be mailed within three years after the last day of the calendar month following the quarterly period in which the department obtains actual knowledge, through its audit or compliance activities, or by written communication by the business or its representative, of the termination, dissolution, or abandonment of the business of the corporation, partnership, limited partnership, limited liability partnership, or limited liability company, or, within eight years after the last day of the calendar month following the quarterly period in which the corporation, partnership, limited partnership, limited liability partnership, or limited liability company business was terminated, dissolved, or abandoned, whichever period expires earlier. If a business or its representative files a notice of termination, dissolution, or abandonment of its business with a state or local agency other than the department, this filing shall not constitute actual knowledge by the department under this section.

(f) For purposes of this section, “willfully fails to pay or to cause to be paid” means that the failure was the result of an intentional, conscious, and voluntary course of action.

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Section § 34016

This law allows certain authorized peace officers or department employees to inspect premises associated with cannabis activities, like selling, cultivating, or storing. Inspections can only happen in reasonable circumstances and once every 24 hours.

If someone doesn't allow an inspection, they could face a misdemeanor charge, with penalties including fines up to $5,000 or jail time.

The law also permits the seizure of cannabis products that lack tax evidence, are insecurely packaged, sold by unlicensed individuals, or not properly reported in the state's system. Seized items are considered forfeited.

Moreover, anyone providing false reports can be fined $1,000 per offense. Violations are treated as misdemeanors, and all resulting funds go to the California Cannabis Tax Fund.

(a) Any peace officer or department employee granted limited peace officer status pursuant to paragraph (6) of subdivision (a) of Section 830.11 of the Penal Code, upon presenting appropriate credentials, is authorized to enter any place as described in paragraph (2) and to conduct inspections in accordance with the following paragraphs, inclusive.

(1) Inspections shall be performed in a reasonable manner and at times that are reasonable under the circumstances, taking into consideration the normal business hours of the place to be entered.

(2) Inspections may be at any place at which cannabis or cannabis products are sold to purchasers, cultivated, or stored, at any site where evidence of activities involving evasion of tax may be discovered, or at any place where any package, label, advertisement, or other document or object of any kind bearing the universal symbol as described in paragraph (7) of subdivision (c) of Section 26130 of the Business and Professions Code are sold or stored in violation of Section 26031.6 of the Business and Professions Code.

(3) Inspections shall be conducted no more than once in a 24-hour period.

(b) Any person who fails or refuses to allow an inspection shall be guilty of a misdemeanor. Each offense shall be punished by a fine not to exceed five thousand dollars ($5,000), or imprisonment not exceeding one year in a county jail, or both the fine and imprisonment. The court shall order any fines assessed be deposited in the California Cannabis Tax Fund.

(c)

(1) (A) The department or a law enforcement agency may seize cannabis or cannabis products from a person who possesses, stores, owns, or has made a retail sale of those cannabis or cannabis products if any of the following apply:

(i) Until January 1, 2023, the cannabis or cannabis products are without evidence of tax payment.

(ii) The cannabis or cannabis products are not contained in secure packaging.

(iii) The person is an unlicensed person specified in paragraph (1) of subdivision (a) of Section 34015.1.

(iv) The cannabis or cannabis products were not reported in the track and trace system, as specified in subdivision (b) of Section 34015.1.

(B) The department may seize any package, label, advertisement, or other document or object of any kind bearing the universal symbol in violation of Section 26031.6 of the Business and Professions Code and deemed contraband. Any package, label, advertisement, or other document or object seized by the department pursuant to this paragraph shall be deemed forfeited and the department shall comply with the procedures set forth in Sections 30436 to 30449, inclusive.

(C) Any cannabis or cannabis products seized by a law enforcement agency or the department shall be deemed forfeited and the department shall comply with the procedures set forth in Sections 30436 through 30449, inclusive.

(2) Any seizures authorized pursuant to paragraph (1) of this subdivision are in addition to any criminal or civil penalties that may be imposed by law, including subdivision (e) of this section.

(d) Any person who renders a false or fraudulent report is guilty of a misdemeanor and subject to a fine not to exceed one thousand dollars ($1,000) for each offense.

(e) Any violation of any provisions of this part, except as otherwise provided, is a misdemeanor and is punishable as such.

(f) All moneys remitted to the department under this part shall be credited to the California Cannabis Tax Fund.

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Section § 34017

This section mandates that the Legislative Analyst's Office report to the California Legislature by January 1, 2020. The report's purpose is to suggest changes to the tax rate to both undercut illegal market prices and discourage use by people under 21. The tax adjustments should also ensure enough revenue is generated for specific programs.

The Legislative Analyst’s Office shall submit a report to the Legislature by January 1, 2020, with recommendations to the Legislature for adjustments to the tax rate to achieve the goals of undercutting illicit market prices and discouraging use by persons younger than 21 years of age while ensuring sufficient revenues are generated for the programs identified in Section 34019.

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Section § 34018

The California Cannabis Tax Fund is a special trust fund created to collect taxes, interest, penalties, and other related amounts from cannabis sales. This fund is used exclusively for the purposes of the Control, Regulate and Tax Adult Use of Marijuana Act.

Funds, including any interest earned, are continuously available to be used as specified by this Act, without being restricted by normal fiscal year budgeting. The funds are not considered part of the state's General Fund, meaning they aren't subject to the same rules and can't be used as general revenue for the state.

(a) The California Cannabis Tax Fund is hereby created in the State Treasury. The Tax Fund shall consist of all taxes, interest, penalties, and other amounts collected and paid to the department pursuant to this part, less payment of refunds.

(b) Notwithstanding any other law, the California Cannabis Tax Fund is a special trust fund established solely to carry out the purposes of the Control, Regulate and Tax Adult Use of Marijuana Act and all revenues deposited into the Tax Fund, together with interest or dividends earned by the fund, are hereby continuously appropriated for the purposes of the Control, Regulate and Tax Adult Use of Marijuana Act without regard to fiscal year and shall be expended only in accordance with the provisions of this part and its purposes.

(c) Notwithstanding any other law, the taxes imposed by this part and the revenue derived therefrom, including investment interest, shall not be considered to be part of the General Fund, as that term is used in Chapter 1 (commencing with Section 16300) of Part 2 of Division 4 of Title 2 of the Government Code, shall not be considered General Fund revenue for purposes of Section 8 of Article XVI of the California Constitution and its implementing statutes, and shall not be considered “moneys” for purposes of subdivisions (a) and (b) of Section 8 of Article XVI of the California Constitution and its implementing statutes.

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Section § 34019

This section details how tax revenues from cannabis sales are distributed annually. Initially, funds cover the costs of administering cannabis laws, with set amounts going to university research, highway patrol for impaired driving protocols, economic development grants, and cannabis medical research. After these allocations, remaining funds are divided among youth substance prevention and treatment programs, environmental restoration and protection efforts, and law enforcement training and grants for addressing cannabis-related public safety issues. Notably, precise disbursements for particular programs will not happen in the fiscal years 2022-2023 and 2023-2024. Lastly, any changes to these allocations after July 2028 must still align with the original intent and financial commitments.

(a)

(1) For each fiscal year, the Department of Finance shall estimate revenues to be received pursuant to Sections 34011, 34011.2, and 34012 and provide those estimates to the Controller no later than June 15 of each year. The Controller shall use these estimates when disbursing funds pursuant to this section. Except as provided in paragraph (2), before any funds are disbursed pursuant to subdivisions (b), (c), (d), and (e) of this section, the Controller shall disburse from the tax fund to the appropriate account, without regard to fiscal year, the following:

(A) Reasonable costs incurred by the department for administering and collecting the taxes imposed by this part, except that such costs shall not exceed 4 percent of tax revenues received.

(B) Reasonable costs incurred by the Department of Cannabis Control for maintaining and operating the track and trace program and for conducting any civil or criminal enforcement against unauthorized commercial cannabis activity pursuant to Division 10 (commencing with Section 26000) of the Business and Professions Code.

(C) Reasonable costs incurred by the Department of Fish and Wildlife, the State Water Resources Control Board, and the Department of Pesticide Regulation for carrying out their respective duties under Division 10 (commencing with Section 26000) of the Business and Professions Code to the extent those costs are not otherwise reimbursed.

(D) Reasonable costs incurred by the Governor’s Office of Business and Economic Development for implementing, administering, and enforcing Chapter 23 (commencing with Section 26240) of Division 10 of the Business and Professions Code.

(E) Reasonable costs incurred by the Controller for performing duties imposed by the Control, Regulate and Tax Adult Use of Marijuana Act, including the audit required by Section 34020.

(F) Reasonable costs incurred by the Department of Finance for conducting the performance audit pursuant to Section 26191 of the Business and Professions Code.

(G) Reasonable costs incurred by the Legislative Analyst’s Office for performing duties imposed by Section 34017.

(H) Sufficient funds to reimburse the Division of Labor Standards Enforcement and the Division of Occupational Safety and Health within the Department of Industrial Relations and the Employment Development Department for the costs of applying and enforcing state labor laws to licensees under Division 10 (commencing with Section 26000) of the Business and Professions Code.

(2) Notwithstanding paragraph (1), the Controller shall not make disbursements pursuant to subparagraph (A), (B), (C), (E), or (H) for the 2022–23 and 2023–24 fiscal years.

(b) The Controller shall next disburse the sum of ten million dollars ($10,000,000) to a public university or universities in California annually beginning with the 2018–19 fiscal year until the 2028–29 fiscal year to research and evaluate the implementation and effect of the Control, Regulate and Tax Adult Use of Marijuana Act, and shall, if appropriate, make recommendations to the Legislature and Governor regarding possible amendments to the Control, Regulate and Tax Adult Use of Marijuana Act. The recipients of these funds shall publish reports on their findings at a minimum of every two years and shall make the reports available to the public. The Department of Cannabis Control shall select the universities to be funded. The research funded pursuant to this subdivision shall include but not necessarily be limited to:

(1) Impacts on public health, including health costs associated with cannabis use, as well as whether cannabis use is associated with an increase or decrease in use of alcohol or other drugs.

(2) The impact of treatment for maladaptive cannabis use and the effectiveness of different treatment programs.

(3) Public safety issues related to cannabis use, including studying the effectiveness of the packaging and labeling requirements and advertising and marketing restrictions contained in the act at preventing underage access to and use of cannabis and cannabis products, and studying the health-related effects among users of varying potency levels of cannabis and cannabis products.

(4) Cannabis use rates, maladaptive use rates for adults and youth, and diagnosis rates of cannabis-related substance use disorders.

(5) Cannabis market prices, illicit market prices, tax structures and rates, including an evaluation of how to best tax cannabis based on potency, and the structure and function of licensed cannabis businesses.

(6) Whether additional protections are needed to prevent unlawful monopolies or anticompetitive behavior from occurring in the adult-use cannabis industry and, if so, recommendations as to the most effective measures for preventing such behavior.

(7) The economic impacts in the private and public sectors, including, but not necessarily limited to, job creation, workplace safety, revenues, taxes generated for state and local budgets, and criminal justice impacts, including, but not necessarily limited to, impacts on law enforcement and public resources, short- and long-term consequences of involvement in the criminal justice system, and state and local government agency administrative costs and revenue.

(8) Whether the regulatory agencies tasked with implementing and enforcing the Control, Regulate and Tax Adult Use of Marijuana Act are doing so consistent with the purposes of the act, and whether different agencies might do so more effectively.

(9) Environmental issues related to cannabis production and the criminal prohibition of cannabis production.

(10) The geographic location, structure, and function of licensed cannabis businesses, and demographic data, including race, ethnicity, and gender, of licenseholders.

(11) The outcomes achieved by the changes in criminal penalties made under the Control, Regulate and Tax Adult Use of Marijuana Act for cannabis-related offenses, and the outcomes of the juvenile justice system, in particular, probation-based treatments and the frequency of up-charging illegal possession of cannabis or cannabis products to a more serious offense.

(c) The Controller shall next disburse the sum of three million dollars ($3,000,000) annually to the Department of the California Highway Patrol beginning with the 2018–19 fiscal year until the 2022–23 fiscal year to establish and adopt protocols to determine whether a driver is operating a vehicle while impaired, including impairment by the use of cannabis or cannabis products, and to establish and adopt protocols setting forth best practices to assist law enforcement agencies. The Department of the California Highway Patrol may hire personnel to establish the protocols specified in this subdivision. In addition, the Department of the California Highway Patrol may make grants to public and private research institutions for the purpose of developing technology for determining when a driver is operating a vehicle while impaired, including impairment by the use of cannabis or cannabis products.

(d) The Controller shall next disburse the sum of ten million dollars ($10,000,000) beginning with the 2018–19 fiscal year and increasing ten million dollars ($10,000,000) each fiscal year thereafter until the 2022–23 fiscal year, at which time the disbursement shall be fifty million dollars ($50,000,000) each year thereafter, to the Governor’s Office of Business and Economic Development, in consultation with the Labor and Workforce Development Agency and the State Department of Social Services, to administer a community reinvestments grants program to local health departments and at least 50 percent to qualified community-based nonprofit organizations to support job placement, mental health treatment, substance use disorder treatment, system navigation services, legal services to address barriers to reentry, and linkages to medical care for communities disproportionately affected by past federal and state drug policies. The office shall solicit input from community-based job skills, job placement, and legal service providers with relevant expertise as to the administration of the grants program. In addition, the office shall periodically evaluate the programs it is funding to determine the effectiveness of the programs, shall not spend more than 4 percent for administrative costs related to implementation, evaluation, and oversight of the programs, and shall award grants annually, beginning no later than January 1, 2020.

(e) The Controller shall next disburse the sum of two million dollars ($2,000,000) annually to the University of California San Diego Center for Medicinal Cannabis Research to further the objectives of the center, including the enhanced understanding of the efficacy and adverse effects of cannabis as a pharmacological agent.

(f) By July 15 of each fiscal year beginning in the 2018–19 fiscal year, the Controller shall, after disbursing funds pursuant to subdivisions (a), (b), (c), (d), and (e), disburse funds deposited in the tax fund during the prior fiscal year into sub-trust accounts, which are hereby created, as follows:

(1) Sixty percent shall be deposited in the Youth Education, Prevention, Early Intervention and Treatment Account, and disbursed by the Controller to the State Department of Health Care Services for programs for youth that are designed to educate about and to prevent substance use disorders and to prevent harm from substance use. The State Department of Health Care Services shall enter into interagency agreements with the State Department of Public Health and the State Department of Education to implement and administer these programs. The programs shall emphasize accurate education, effective prevention, early intervention, school retention, and timely treatment services for youth, their families, and caregivers. The programs may include, but are not limited to, the following components:

(A) Prevention and early intervention services including outreach, risk survey and education to youth, families, caregivers, schools, primary care health providers, behavioral health and substance use disorder service providers, community and faith-based organizations, foster care providers, juvenile and family courts, and others to recognize and reduce risks related to substance use, and the early signs of problematic use and of substance use disorders.

(B) Grants to schools to develop and support student assistance programs, or other similar programs, designed to prevent and reduce substance use, and improve school retention and performance, by supporting students who are at risk of dropping out of school and promoting alternatives to suspension or expulsion that focus on school retention, remediation, and professional care. Schools with higher than average dropout rates should be prioritized for grants.

(C) Grants to programs for outreach, education, and treatment for homeless youth and out-of-school youth with substance use disorders.

(D) Access and linkage to care provided by county behavioral health programs for youth, and their families and caregivers, who have a substance use disorder or who are at risk for developing a substance use disorder.

(E) Youth-focused substance use disorder treatment programs that are culturally and gender competent, trauma informed, evidence based, and that provide a continuum of care that includes screening and assessment (substance use disorder as well as mental health), early intervention, active treatment, family involvement, case management, overdose prevention, prevention of communicable diseases related to substance use, relapse management for substance use and other cooccurring behavioral health disorders, vocational services, literacy services, parenting classes, family therapy and counseling services, medication-assisted treatments, psychiatric medication, and psychotherapy. When indicated, referrals must be made to other providers.

(F) To the extent permitted by law and where indicated, interventions shall utilize a two-generation approach to addressing substance use disorders with the capacity to treat youth and adults together. This would include supporting the development of family-based interventions that address substance use disorders and related problems within the context of families, including parents, foster parents, caregivers, and all their children.

(G) Programs to assist individuals, as well as families and friends of drug-using young people, to reduce the stigma associated with substance use including being diagnosed with a substance use disorder or seeking substance use disorder services. This includes peer-run outreach and education to reduce stigma, anti-stigma campaigns, and community recovery networks.

(H) Workforce training and wage structures that increase the hiring pool of behavioral health staff with substance use disorder prevention and treatment expertise. Provide ongoing education and coaching that increases substance use treatment providers’ core competencies and trains providers on promising and evidence-based practices.

(I) Construction of community-based youth treatment facilities.

(J) The State Department of Health Care Services, the State Department of Public Health, and the State Department of Education may contract with each county behavioral health program for the provision of services.

(K) Funds shall be allocated to counties based on demonstrated need, including the number of youth in the county, the prevalence of substance use disorders among adults, and confirmed through statistical data, validated assessments, or submitted reports prepared by the applicable county to demonstrate and validate need.

(L) The State Department of Health Care Services, State Department of Public Health, and the State Department of Education shall periodically evaluate the programs they are funding to determine the effectiveness of the programs.

(M) The State Department of Health Care Services, State Department of Public Health, and the State Department of Education may use up to 4 percent of the moneys allocated to the Youth Education, Prevention, Early Intervention and Treatment Account for administrative costs related to implementation, evaluation, and oversight of the programs.

(N) If the Department of Finance ever determines that funding pursuant to cannabis taxation exceeds demand for youth prevention and treatment services in the state, the State Department of Health Care Services, State Department of Public Health, and the State Department of Education shall provide a plan to the Department of Finance to provide treatment services to adults as well as youth using these funds.

(O) The State Department of Health Care Services, the State Department of Public Health, and the State Department of Education shall solicit input from volunteer health organizations, physicians who treat addiction, treatment researchers, family therapy and counseling providers, and professional education associations with relevant expertise as to the administration of any grants made pursuant to this paragraph.

(P) On or before July 10, 2023, the State Department of Health Care Services shall provide to the Legislature, pursuant to Section 9795 of the Government Code, a spending report of funds from the Youth Education, Prevention, Early Intervention and Treatment Account for the 2021–22 and 2022–23 fiscal years. On or before July 10, 2024, and annually thereafter, the State Department of Health Care Services shall provide to the Legislature, pursuant to Section 9795 of the Government Code, a spending report of funds from the Youth Education, Prevention, Early Intervention and Treatment Account for the prior fiscal year.

(2) Twenty percent shall be deposited in the Environmental Restoration and Protection Account, and disbursed by the Controller as follows:

(A) To the Department of Fish and Wildlife and the Department of Parks and Recreation for the cleanup, remediation, and restoration of environmental damage in watersheds affected by cannabis cultivation and related activities, including, but not limited to, damage that occurred prior to enactment of this part, and to support local partnerships for this purpose. The Department of Fish and Wildlife and the Department of Parks and Recreation may distribute a portion of the funds they receive from the Environmental Restoration and Protection Account through grants for purposes specified in this paragraph. The Department of Fish and Wildlife shall use moneys made available pursuant to subparagraph (D) for purposes of this subparagraph to fund its activities required pursuant to Sections 1024 and 1025 of the Fish and Game Code.

(B) To the Department of Fish and Wildlife and the Department of Parks and Recreation for the stewardship and operation of state-owned wildlife habitat areas and state park units in a manner that discourages and prevents the illegal cultivation, production, sale, and use of cannabis and cannabis products on public lands, and to facilitate the investigation, enforcement, and prosecution of illegal cultivation, production, sale, and use of cannabis or cannabis products on public lands.

(C) To the Department of Fish and Wildlife to assist in funding the watershed enforcement program and multiagency task force established pursuant to subdivisions (b) and (c) of Section 12029 of the Fish and Game Code to facilitate the investigation, enforcement, and prosecution of these offenses and to ensure the reduction of adverse impacts of cannabis cultivation, production, sale, and use on fish and wildlife habitats throughout the state.

(D) For purposes of this paragraph, the Secretary of the Natural Resources Agency shall determine the allocation of revenues between the Department of Fish and Wildlife and the Department of Parks and Recreation. During the first five years of implementation, first consideration should be given to funding purposes specified in subparagraph (A).

(E) Funds allocated pursuant to this paragraph shall be used to increase and enhance activities described in subparagraphs (A), (B), and (C), and not replace allocation of other funding for these purposes. Accordingly, annual General Fund appropriations to the Department of Fish and Wildlife and the Department of Parks and Recreation shall not be reduced below the levels provided in the Budget Act of 2014 (Chapter 25 of the Statutes of 2014).

(3) Twenty percent shall be deposited into the State and Local Government Law Enforcement Account and disbursed by the Controller as follows:

(A) To the Department of the California Highway Patrol for conducting training programs for detecting, testing, and enforcing laws against driving under the influence of alcohol and other drugs, including driving under the influence of cannabis. The Department of the California Highway Patrol may hire personnel to conduct the training programs specified in this subparagraph.

(B) To the Department of the California Highway Patrol to fund internal California Highway Patrol programs and grants to qualified nonprofit organizations and local governments for education, prevention, and enforcement of laws related to driving under the influence of alcohol and other drugs, including cannabis; programs that help enforce traffic laws, educate the public in traffic safety, provide varied and effective means of reducing fatalities, injuries, and economic losses from collisions; and for the purchase of equipment related to enforcement of laws related to driving under the influence of alcohol and other drugs, including cannabis.

(C) To the Board of State and Community Corrections for making grants to local governments to assist with law enforcement, fire protection, or other local programs addressing public health and safety associated with the implementation of the Control, Regulate and Tax Adult Use of Marijuana Act. A local government shall be eligible for a grant only if it either allows the retail sale of cannabis in storefronts or, for jurisdictions with a population of 10,000 residents or less, allows cannabis delivery in the jurisdiction that serves both medicinal and adult-use consumers. The Board of State and Community Corrections shall prioritize grant awards for local governments whose grant application includes illicit cannabis enforcement. The board may award grants both competitively and based on a formula to provide consistent and ongoing funding for local governments to implement the programs described in this subparagraph.

(D) For purposes of this paragraph, the Department of Finance shall determine the allocation of revenues between the agencies; provided, however, beginning in the 2022–23 fiscal year the amount allocated pursuant to subparagraph (A) shall not be less than ten million dollars ($10,000,000) annually and the amount allocated pursuant to subparagraph (B) shall not be less than forty million dollars ($40,000,000) annually. In determining the amount to be allocated before the 2022–23 fiscal year pursuant to this paragraph, the Department of Finance shall give initial priority to subparagraph (A).

(g) Funds allocated pursuant to subdivision (f) shall be used to increase the funding of programs and purposes identified and shall not be used to replace allocation of other funding for these purposes.

(h) Effective July 1, 2028, the Legislature may amend this section by majority vote to further the purposes of the Control, Regulate and Tax Adult Use of Marijuana Act, including allocating funds to programs other than those specified in subdivisions (d) and (f). Any revisions pursuant to this subdivision shall not result in a reduction of funds to accounts established pursuant to subdivisions (d) and (f) in any subsequent year from the amount allocated to each account in the 2027–28 fiscal year. Prior to July 1, 2028, the Legislature may not change the allocations to programs specified in subdivisions (d) and (f).

cannabis tax revenue allocation cannabis research funding youth substance prevention ...

Section § 34019.01

This law outlines how California will manage certain tax funds for the fiscal years 2021-2022, 2022-2023, and 2023-2024. After required disbursements, the Controller will allocate remaining funds to specific sub-trust accounts, but this allocation cannot exceed the amount set for the 2020-2021 fiscal year. If there is more money than this baseline amount, the excess will stay in the tax fund. It will be used to adjust future disbursements so that each of the following fiscal years' funding meets the 2020-2021 level. Additionally, by January 1, 2026, any leftover funds and their earned interest must be distributed to the sub-trust accounts.

Notwithstanding subdivision (f) of Section 34019, for the 2021–22 fiscal year, the 2022–23 fiscal year, and the 2023–24 fiscal year, after disbursing funds pursuant to subdivisions (a), (b), (c), (d), and (e) of Section 34019, by November 1 following the fiscal year, the Controller shall disburse funds deposited in the tax fund during the prior fiscal year into sub-trust accounts in an amount not to exceed the 2020–21 fiscal year baseline. Any amount of funds that exceeds the 2020–21 fiscal year baseline shall remain in the tax fund for that fiscal year and shall be disbursed, as follows:

(a)

(1) For the 2021–22 fiscal year, by November 1, 2022, the Controller shall disburse from the tax fund, to the extent available, an amount necessary to enable funds disbursed to the sub-trust accounts for the 2021–22 fiscal year pursuant to subdivision (f) of Section 34019 and Section 34019.1 to be equal to the 2020–21 fiscal year baseline.

(2) For the 2022–23 fiscal year, by November 1, 2023, the Controller shall disburse, to the extent available, an amount necessary to enable funds disbursed to the sub-trust accounts for the 2022–23 fiscal year pursuant to subdivision (f) of Section 34019 and Section 34019.1 to be equal to the 2020–21 fiscal year baseline.

(3) For the 2023–24 fiscal year, by November 1, 2024, the Controller shall disburse, to the extent available, an amount necessary to enable funds disbursed to the sub-trust accounts for the 2023–24 fiscal year pursuant to subdivision (f) of Section 34019 and Section 34019.1 to be equal to the 2020–21 fiscal year baseline.

(b) On or before January 1, 2026, any remaining moneys in the tax fund retained pursuant to this section and any interest derived shall be disbursed to the sub-trust accounts pursuant to subdivision (f) of Section 34019.

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Section § 34019.1

This section outlines the allocation of funds from California's General Fund for specific fiscal years, with detailed limits and conditions. In the 2022–23 fiscal year, $10,000 is assigned, and in the 2023–24 fiscal year, $150 million is allocated, with no funds beyond these amounts allowed. By November 1, 2023, and 2024, specific transfers must be made to match past baseline funding levels. These allocations are available until June 30, 2025, and the statute is set to be repealed on December 31, 2026.

(a) In the 2022–23 fiscal year, the sum of ten thousand dollars ($10,000) is hereby appropriated from the General Fund for the purposes of this section. In the 2023–24 fiscal year, the sum of one hundred fifty million dollars ($150,000,000) is hereby appropriated from the General Fund, as specified in subdivision (b), for the purposes of this section. In no event shall any funds in excess of those amounts be transferred pursuant to this section. These funds shall be available for encumbrance or expenditure until June 30, 2025.

(b) Upon the order of the Department of Finance, the Controller shall make the following transfers from the General Fund, in an amount not to exceed one hundred fifty million dollars ($150,000,000) in fiscal years 2023–24 and 2024–25, cumulatively:

(1) By November 1, 2023, the Controller shall, subject to the limitation in subdivision (a), transfer from the General Fund an amount that would enable funds disbursed to the sub-trust accounts for the 2022–23 fiscal year, pursuant to subdivision (f) of Section 34019, Section 34019.01, and this paragraph, to be equal to the 2020–21 fiscal year baseline.

(2) By November 1, 2024, the Controller shall, subject to the limitation in subdivision (a), transfer from the General Fund an amount that would enable funds disbursed to the sub-trust accounts for the 2023–24 fiscal year, pursuant to subdivision (f) of Section 34019, Section 34019.01, and this paragraph, to be equal to the 2020–21 fiscal year baseline.

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Section § 34019.5

This section states that when the State Department of Health Care Services makes or changes contracts for specific programs, these contracts don't have to follow the usual rules and approval processes for state contracts. They are not subject to certain government codes and are exempt from the usual state administrative guidelines.

Contracts entered into or amended by the State Department of Health Care Services to implement and administer the programs identified in paragraph (1) of subdivision (f) of Section 34019 shall be exempt from Chapter 6 (commencing with Section 14825) of Part 5.5 of Division 3 of Title 2 of the Government Code, Section 19130 of the Government Code, Part 2 (commencing with Section 10100) of Division 2 of the Public Contract Code, shall be exempt from the State Administrative Manual, and shall not be subject to the review or approval of any division of the Department of General Services.

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Section § 34020

The Controller is responsible for regularly checking the Tax Fund to make sure the money is being used and tracked properly according to the rules.

The Controller shall periodically audit the Tax Fund to ensure that those funds are used and accounted for in a manner consistent with this part and as otherwise required by law.

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Section § 34020.1

The Department of Cannabis Control must deliver a report to the Legislature by March 1, 2025, assessing California's cannabis industry. The report should cover various topics, such as which areas allow or don't allow cannabis business, the market's growth or shrinkage, the number of equity licensees and their locations, and the health of the Cannabis Tax Fund. It will also assess cannabis business viability and examine the effects of halting a specific cultivation tax. Recommendations to improve the legal cannabis market might be included. The department can hire universities to help create this report and can combine it with other required reports.

(a) On or before March 1, 2025, the Department of Cannabis Control, in consultation with the Department of Finance and the California Department of Tax and Fee Administration, shall submit a report to the Legislature on the condition and health of the cannabis industry in the state. The report shall include, but is not limited to, the following information:

(1) How many local jurisdictions have permitted commercial cannabis activity.

(2) How many local jurisdictions have not permitted commercial cannabis activity.

(3) Information or analysis concerning the potential expansion or contraction of the cannabis market in the state, which may include information concerning any increase in retail cannabis sales and activity in the illicit market.

(4) How many equity licensees have been approved by the Department of Cannabis Control.

(5) In what counties the state equity licensees located.

(6) The health of the Cannabis Tax Fund, and any future projections of Cannabis Tax Fund revenues.

(7) Information on the viability of cannabis businesses in the state, and the ability to continue to operate cannabis businesses in the state, from a general and equity licensee standpoint.

(8) The impacts of the suspension of the cultivation tax imposed by paragraph (2) of subdivision (a) of Section 34012, including whether that suspension resulted in a decrease in retail cannabis prices or increased participation in the legal cannabis market.

(b) The report may include recommendations to strengthen the state’s legal cannabis market.

(c) The Department of Cannabis Control may contract with a public university or universities in California to prepare the report. Subject to approval by the Department of Cannabis Control, the university or universities may contract with other organizations in connection with the report.

(d) The Department of Cannabis Control may consolidate this report with any other reports required under Division 10 (commencing with Section 26000) of the Business and Professions Code.

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Section § 34021

This law states that the taxes discussed in this part are separate and must be paid on top of any other local taxes that a city, county, or city and county might impose.

The taxes imposed by this part shall be in addition to any other tax imposed by a city, county, or city and county.

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Section § 34021.5

This law allows counties in California to impose a tax on activities related to cannabis, such as cultivation and distribution, performed by licensed businesses. The county board of supervisors decides the specific activities and tax rates, as well as how the tax will be collected. Taxes can be collected like other county taxes and may apply to all or some activities. Any tax must be approved by voters as required by law. This law doesn't stop counties from collecting other fees or taxes related to cannabis, but it doesn't allow counties to add extra sales taxes beyond what's authorized by state regulations.

(a)

(1) A county may impose a tax on the privilege of cultivating, manufacturing, producing, processing, preparing, storing, providing, donating, selling, or distributing cannabis or cannabis products by a licensee operating under Division 10 (commencing with Section 26000) of the Business and Professions Code.

(2) The board of supervisors shall specify in the ordinance proposing the tax the activities subject to the tax, the applicable rate or rates, the method of apportionment, if necessary, and the manner of collection of the tax. The tax may be imposed for general governmental purposes or for purposes specified in the ordinance by the board of supervisors.

(3) In addition to any other method of collection authorized by law, the board of supervisors may provide for the collection of the tax imposed pursuant to this section in the same manner, and subject to the same penalties and priority of lien, as other charges and taxes fixed and collected by the county. A tax imposed pursuant to this section is a tax and not a fee or special assessment. The board of supervisors shall specify whether the tax applies throughout the entire county or within the unincorporated area of the county.

(4) The tax authorized by this section may be imposed upon any or all of the activities set forth in paragraph (1), as specified in the ordinance, regardless of whether the activity is undertaken individually, collectively, or cooperatively, and regardless of whether the activity is for compensation or gratuitous, as determined by the board of supervisors.

(b) A tax imposed pursuant to this section shall be subject to applicable voter approval requirements imposed by law.

(c) This section is declaratory of existing law and does not limit or prohibit the levy or collection of any other fee, charge, or tax, or a license or service fee or charge upon, or related to, the activities set forth in subdivision (a) as otherwise provided by law. This section shall not be construed as a limitation upon the taxing authority of a county as provided by law.

(d) This section shall not be construed to authorize a county to impose a sales or use tax in addition to the sales and use taxes imposed under an ordinance conforming to the provisions of Sections 7202 and 7203 of this code.

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