Tax Issues Surrounding California MMJ Delivery Fees Crop Up

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Medical marijuana delivery services in California – and the dispensaries that use them to transport cannabis to patients – may face a challenge on the tax front if they’re not careful.

In some cases, MMJ delivery fees are taxable, Jerome E. Horton, chairman of the state’s Board of Equalization, told Westside Today. In other cases they are not, meaning businesses could therefore accidentally pay more taxes than they owe.

Although sales of cannabis are generally taxable under California law, delivery fees are not if certain conditions are met. A third-party must actually handle the delivery, for instance, and the charge cannot be more than what the dispensary actually paid the delivery service to handle the transaction.

Dispensaries also must list the delivery fee separately on their invoice and ensure it can be independently verified.

If these conditions are not met – or a dispensary fails to keep records that verify their cost to use a delivery service – the entire delivery fee is taxable, Horton said.

If the fee exceeds the cost of the service to the dispensary, the difference between the price charged and the expense is taxable.

Medical marijuana delivery is a hot part of the industry in California, and some companies that facilitate the process have landed millions of dollars in investment money recently.