The City of Los Angeles is requiring certain cannabis distributors and transporters to pay an apportioned tax for “intercity” cannabis business activities. Licensed cannabis businesses located elsewhere, but who do business in Los Angeles, will have to pay taxes on an apportioned amount of revenue generated from doing business in the city. This is effective immediately and the City will look back as far as January 1, 2018.
*Warning: Failure to comply may subject you to financial and/or criminal penalties. See below for more information on what to expect regarding compliance.*
A cannabis distributor who sells to retailers or other licensed customers within the City of Los Angeles?
– OR –
A distributor-transporter that transports product to the City of Los Angeles?
ONE: Get a City of Los Angeles Business Tax Registration Certificate (“BTRC”).
Apply for and be issued a LA City Business Tax Registration Certificate (“BTRC”) (See attached Letter from the City Office of Finance and complete and submit the Application for Business Tax on pages 3 & 4);
TWO: Pay the City tax on an apportioned amount.
Remit the tax on the apportioned gross receipts from all sales made to retailers or other customers in the City of LA. The City doesn’t tax total sales you make in LA; instead, it will apportion the tax to 35% (City Clerk Ruling No. 13).
Determine whether you owe 1% or 2% tax. The applicable tax rate depends on which activity you are engaged in. The tax rate for distribution is 2% of the apportioned amount. The tax rate for transport-only distribution is 1% of the apportioned amount. See Sections 21.51 and 21.52 of Los Angeles Municipal Code (L.A.M.C.).
Let’s say you are a transporter with total gross receipts of $350,000 from transactions in LA.
Reportable amount: 35% of your gross receipts = $122,500
Tax due: 1% of the reportable amount = $1,225
THREE: Print and store a copy of the BTRC in all vehicles that distribute or deliver in LA.
The LA City Office of Finance is serious about ensuring compliance. Every licensee is audited yearly by the City. You may be audited as early as within the first 6 months of being issued a BTRC. During the audit, they will request information to back up your calculation of gross receipts. If you underreport, or can’t substantiate your calculation, you may be penalized and subjected to a higher tax amount. Also be aware that, if you are engaged in business in LA and you come into contact with LAPD, officers may ask for your BTRC. So, get your BTRC, pay the apportionment tax, and be sure you have your BTRC on hand when you’re doing business in LA.
This email is provided as informational only and does not constitute legal advice.
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