Cannabis Tax Disputes: Navigating the Complex Landscape

The legal landscape surrounding cannabis has seen significant changes in recent years. With the legalization and commercialization of cannabis, there has been a surge in regulatory and tax-related challenges. At the Cannabis Law Group, we specialize in assisting clients who find themselves embroiled in cannabis tax disputes.

At Cannabis Law Group, our seasoned tax lawyers frequently assist clients facing California Sales Tax challenges. Historically, the State Board of Equalization, often referred to as the "SBE" or "BOE", was responsible for collecting Sales Taxes in California. However, a shift occurred in July 2017 when these responsibilities transitioned to a newly established entity, the California Department of Tax and Fee Administration (CDTFA).

Recently, we've observed an uptick in clients reaching out after receiving a cannabis assessment tax from the California Department of Tax and Fee Administration (CDTFA). These assessments often come as a shock, especially to those who believed they were operating within the confines of the law.

"They are receiving these cannabis tax bills from the state because the clients have been caught with large amounts of unlicensed cannabis products. We usually see this in the form of a landlord leasing property to an unlicensed outdoor cannabis cultivator, or the person may have run an unlicensed delivery service, for example, and then they get arrested, then they get these bills. We fight to lower the bill or get it dismissed."

When the CDTFA initiates a Sales Tax Audit, they employ a diverse range of methods tailored to the specific business in question. For instance, one of our cannabis tax assessment clients was operating an unlicensed delivery service when her house was raided. After the criminal case settled, our client received a “Payment Voucher” requesting her to pay taxes on the estimated amount of cannabis products discovered during the raid. Another client received a cannabis tax bill after her tenant was found to be an unlicensed cultivator, and who was growing cannabis in a greenhouse on her property without a license. After the raid, our client received a cannabis tax bill amounting to hundreds of thousands of dollars. Law enforcement generates a list of the items seized and they work together with the California Department of Tax and Fee Administration to issue the cannabis tax bill. Some of our clients have also received a “Notice of Levy”, amounting to hundreds of thousands of dollars allegedly based on the fair market value of the cannabis seized. The CDTFA can sometimes over estimate the value of these goods, for example, so we fought hard to get the bill lowered. The cannabis tax attorneys at Cannabis law can appeal your cannabis tax bills.

Also know that the CDTFA can also scrutinize any purchase/sale records, using this data alongside sales prices to ascertain total sales. Regardless of the business nature, an initial review by the Sales Tax auditor typically involves juxtaposing the total sales noted in the taxpayer's records with those declared on their Sales Tax returns; contrasting the total sales in the taxpayer's records with those on their income tax returns; evaluating the California Sales Tax reimbursement collected by the taxpayer against the California Sales Tax declared on the returns, and cross-referencing the reported sales intended for resale with resale certificates.

After the initial cannabis assessment, clients often receive a "Notice of Determination." This notice solidifies the state's stance on the owed taxes. However, it's crucial to understand that this is not the end of the road. With the right Cannabis Tax Lawyer by your side, there are avenues to appeal and potentially reduce or even dismiss the tax bill entirely.

As experienced Cannabis Tax Attorneys, we understand the intricacies of cannabis tax disputes. Whether you're facing challenges due to:

• Unlicensed cultivation
• Operating an unauthorized delivery service
• Any other cannabis tax dispute

We are here to guide you through the process, ensuring your rights are protected and exploring all avenues to achieve the best possible outcome.

Navigating the world of cannabis taxation can be daunting. However, with the right legal team by your side, you can face these challenges head-on. At the Cannabis Law Group, we are committed to providing our clients with top-tier legal representation, ensuring they are well-equipped to handle any cannabis tax-related issues.