A new issue has recently come up for the California medical marijuana industry concerning delivery services. The dispensaries that use delivery services to transport cannabis to patients may face a new challenge on the tax front if they fail to use caution.
According to Jerome E. Horton, chairman of the state’s Board of Equalization, MMJ delivery fees are taxable in some cases. On the other hand, businesses could pay more in taxes than they owe if they do not realize that those particular delivery fees are not taxable. While the sales of cannabis are generally taxable under California law, delivery fees are not as long as certain conditions have been met.
For example, a dispensary must list the delivery fee separately on their invoice; this ensures that it can be independently verified. In addition, a third-party must be responsible for handling the delivery. The charge incurred cannot be more than what the dispensary actually paid the delivery service for the handling of that transaction.
If this is not documented and these conditions are not met, tax will apply to the seller’s entire delivery charge if it is made in connection with a taxable sale of cannabis products. In the event that this does occur – the fee exceeds the cost of the service to the dispensary – the difference between the price charged and the expense will be taxable.
Board of Equalization (BOE) Chairman Jerome E. Horton reveals that “As a seller of cannabis products, you must report your total sales on your sales and use tax return. If your total sales include nontaxable delivery charges, you should take a deduction for those amounts on the line for ‘Other’ deductions. If you don’t take the deduction, you’ll pay more tax than you owe”.
With investors warming to cannabis, many entrepreneurs are seeing dollar signs, and not just in the sale of cannabis itself. Eaze, a technology company that helps facilitate medical marijuana deliveries to patients, has raised $10 million in venture capital funding. This funding will allow the company to expand geographically while also improving its customer service.
Patients simply use their medical marijuana cards on the company’s websites, enter the strain, and the amount they wish to purchase. Eaze then contacts a dispensary, an independent driver is dispatched to deliver the marijuana and the delivery is made in 15 minutes or less. All of this occurs without Eaze ever physically coming into contact with the marijuana.
The creators of Eaze are not the only ones who have seen the possibilities in these types of services. Many entrepreneurs and investors are seeing the possibilities, but run into problems when trying to secure payment processing. Traditional banks are turning the medical cannabis industry away. And it goes without saying that cash is not a safe option.
Medical marijuana payment processing allows both retail and delivery dispensaries payment processing solutions. Patients will be able to pay with their credit card, debit card or savings account. With questions over regulations and taxes still popping up, medical marijuana payment processing offers a safe option for processing needs.
Contact us for ACH Check Processing solutions for your MMJ business.