Sometimes, a tax liability will go unnoticed; other times, it is possible to avoid these hurdles entirely by being armed with information. It’s important to be careful not to get tangled up in tax law. Once you have made one mistake, it’s a slippery slope – and there are very few “minor” tax mistakes in the business world. Here’s everything you need to know about tax reporting for cannabis in the state of California.
Under California law, whenever the employees of a business are there to perform a service, business law requires their employer to be responsible for withholding, reporting and remitting their payroll taxes. These rules are for non-profit and for-profit sales of both medical and recreational marijuana. This applies to cannabis-related businesses including but not limited to:
Official registration with the EDD
Employers have to register themselves under state law, which must be done through the Employment Development Department. Registration must be done no more than 15 days after their employees have started to receive more than $100 in one annual quarter. It’s always a good idea to check in with the EDD to verify whether or not this registration is required of you in your own employment situation.
To find out if a person working for you is technically an employee, it’s helpful to check with California state law on Information Sheet DE 231. An employee could be anyone from corporate officers to plant caretakers to delivery people.
As long as the law has defined the workers as employees, they must be reported by their employers. This involves providing the EDD with information about their employees such as their names, Social Security number, and how much they’ve been paid.