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Business Taxes Law Guide – Revision 2021
 

Cannabis Tax Law

Section 34010


34010. Definitions. For purposes of this part:

(a) "Arm's length transaction" shall mean a sale entered into in good faith and for valuable consideration that reflects the fair market value in the open market between two informed and willing parties, neither under any compulsion to participate in the transaction.

(b) "Average market price" shall mean both of the following:

(1) (A) In an arm's length transaction, the average retail price determined by the wholesale cost of the cannabis or cannabis products sold or transferred to a cannabis retailer, plus a mark-up, as determined by the department on a biannual basis in six-month intervals.

(B) Notwithstanding subparagraph (A), the department shall not increase the mark-up amount during the period beginning on and after the operative date of the act amending this section by adding this subparagraph and before July 1, 2021.

(2) In a nonarm's length transaction, the cannabis retailer's gross receipts from the retail sale of the cannabis or cannabis products.

(c) "Department" means the California Department of Tax and Fee Administration or its successor agency.

(d) "Bureau" means the Bureau of Cannabis Control within the Department of Consumer Affairs.

(e) "Tax Fund" means the California Cannabis Tax Fund created by Section 34018.

(f) "Cannabis" has the same meaning as set forth in Section 11018 of the Health and Safety Code and shall also mean medicinal cannabis.

(g) "Cannabis products" has the same meaning as set forth in Section 11018.1 of the Health and Safety Code and shall also mean medicinal concentrates and medicinal cannabis products.

(h) "Cannabis flowers" means the dried flowers of the cannabis plant as defined by the board.

(i) "Cannabis leaves" means all parts of the cannabis plant other than cannabis flowers that are sold or consumed.

(j) "Cannabis retailer" means a person required to be licensed as a retailer, non-storefront retailer, microbusiness, or nonprofit pursuant to Division 10 (commencing with Section 26000) of the Business and Professions Code.

(k) "Cultivator" means all persons required to be licensed to cultivate cannabis pursuant to Division 10 (commencing with Section 26000) of the Business and Professions Code.

(l) "Distributor" means a person required to be licensed as a distributor pursuant to Division 10 (commencing with Section 26000) of the Business and Professions Code.

(m) "Enters the commercial market" means cannabis or cannabis products, except for immature cannabis plants and seeds, that complete and comply with a quality assurance review and testing, as described in Section 26110 of the Business and Professions Code.

(n) "Gross receipts" has the same meaning as set forth in Section 6012.

(o) "Microbusiness" has the same meaning as set forth in paragraph (3) of subdivision (a) of Section 26070 of the Business and Professions Code.

(p) "Nonprofit" has the same meaning as set forth in Section 26070.5 of the Business and Professions Code.

(q) "Person" has the same meaning as set forth in Section 6005.

(r) "Retail sale" has the same meaning as set forth in Section 6007.

(s) "Sale" and "purchase" mean any change of title or possession, exchange, or barter, conditional or otherwise, in any manner or by any means whatsoever, for consideration.

(t) "Transfer" means to grant, convey, hand over, assign, sell, exchange, or barter, in any manner or by any means, with or without consideration.

(u) "Unprocessed cannabis" includes cannabis flowers, cannabis leaves, or other categories of harvested cannabis, categories for unprocessed or frozen cannabis or immature plants, or cannabis that is shipped directly to manufacturers.

(v) "Manufacturer" means a person required to be licensed as a manufacturer pursuant to Division 10 (commencing with Section 26000) of the Business and Professions Code.

(w) "Medicinal cannabis patient" shall mean a qualified patient, as defined in Section 11362.7 of the Health and Safety Code, who possesses a physician's recommendation that complies with Article 25 (commencing with Section 2525) of Chapter 5 of Division 2 of the Business and Professions Code, or a qualified patient or primary caregiver for a qualified patient issued a valid identification card pursuant to Section 11362.71 of the Health and Safety Code.

(x) "Designated for donation" shall mean medicinal cannabis donated by a cultivator to a cannabis retailer for subsequent donation to a medicinal cannabis patient pursuant to Section 26071 of the Business and Professions Code.

History—Added by Proposition 64, approved by voters at the November 8, 2016 election, in effect November 9, 2016. Stats. 2017, Ch. 27 (SB 94), in effect June 27, 2017, substituted "cannabis" for "marijuana" throughout; added subdivisions (a) and (b), relettered former subdivisions (a)–(g) as (c)–(i); added "State" after "shall mean the" in subdivision (c); substituted "medicinal" for "medical" in subdivisions (f) and (g); deleted former subdivisions (h)–(j); added subdivisions (j)–(m); relettered former subdivisions (h), (i), (j), (k), and (l) to (n), (r), (q), (o), and (p), respectively; and added subdivisions (s), (t), and (u). Stats. 2017, Ch. 253 (AB 133), in effect September 16, 2017, substituted "department" for "board" after "determined by" in paragraph (1) of subdivision (b); substituted "Department" shall mean the California Department of Tax and Fee Administration" for "Board" shall mean the State Board of Equalization" before "or its successor agency" in subdivision (c); add ", except for immature cannabis plants and seeds," after "cannabis or cannabis product" and substituted "complete and comply with a quality assurance review" for "has completed and complies with all quality assurance, inspection," before "and testing" in subdivision (m); added subdivision (v). Stats. 2018, Ch. 92 (SB 1289), in effect January 1, 2019, deleted "the average market price means" after "transaction, the average" in paragraph (1), and deleted "the average market price means" after "length transaction, the" in paragraph (2), of subdivision (b); substituted "means" for "shall mean" and "has" for "shall have" throughout section; deleted "shall" after "Sale" and "purchase" in subdivision (s); and substituted "includes" for "shall include" after "Unprocessed cannabis" in subdivision (u). Stats. 2019, Ch. 837 (SB 34), in effect January 1, 2020, substituted "mean both of the following:" for "mean" after ""Average market price" shall" in subdivision (b); added "non-storefront retailer," after "licensed as a retailer," in subdivision (j); substituted "products" for "product," after "cannabis or cannabis" in subdivision (m); and added subdivisions (w) and (x). Stats. 2020, Ch. 93 (AB 1872), in effect September 18, 2020, redesignated former paragraph (b)(1) as paragraph (b)(1)(A); and added subparagraph (1)(B) to subdivision (b).