CBD products are becoming more available than ever, featured in a litany of items these days from oils and tinctures to bath bombs and edibles. As more companies and vendors venture into the CBD market, there is a wariness. Not because of the products themselves, but because, much like the sale of alcohol or medicinal marijuana, there is a different branch of taxation for selling CBD products. Here’s everything that a CBD seller needs to know about sales tax and what it means for the consumer and deductions for a company.
CBD in the U.S.
Cannabidiol, or CBD, is the compound found within hemp plants that are commonly associated with the calming properties of marijuana use. Through the endocannabinoid system, some users have found relief for insomnia, stress, anxiety, and inflammation. Some companies are even turning to the use of CBD for energy by combining it with Ayurvedic essential oils as a natural stimulant to prevent users from crashing hard. That energy boost comes with the help of natural ingredients that invigorate the bloodstream and eliminate fatigue.
CBD sales tax varies state by state across the U.S. Most states are allowed to sell CBD products provided they are properly labeled regarding dosage and active ingredients. For example, in Louisiana, sales of hemp-based CBD products are subject to a 3% excise tax for retail sales. However, medicinal CBD items are not subject to that excise tax. New laws and government filings have created a gray area that you should consult your tax expert about.
Beware of THC
If you are selling items with full-spectrum CBD, that contains all parts of the hemp plant, including THC, the psychoactive agent linked to the “high” from marijuana use. The presence of THC in the products you sell can impact your own taxes and those passed on to the consumer. For example, California makes clear that the taxes on CBD topicals and gummies is different from the purchase of actual cannabis from a distributor. An excise 15% tax is charged to those retailers that are passed on to the customer. However, CBD products that contain only trace amounts of THC are not subject to that excise tax, and just sales tax,
In addition to impacts on tax returns for your business, some states bar the use of CBD with the presence of THC. Other states limit CBD use to non-consumable products, barring capsules and extracts from food. In some states, CBD oil and other items are charged as a Tangible Personal Property, or TPP. This states that a product is not a health supplement or medicine. However, in states like New York, this TPP designation avoids a 7% excise tax linked to medical marijuana.
The Tax Filing Process
With deviations in state taxes and your tax situation, you’ll want to consult with a tax pro for peace of mind. However, some business owners may want to take their tax preparation upon themselves. That’s where tax software like Taxslayer or Turbotax may come into effect. You can look into a Simple Tax review, looking into benefits of this software such as live chat and assistance for a state filing in real-time. This can even help you in filing your federal taxes.
You can find your maximum refund by recognizing tax deductions that may be associated with a CBD company. You’ll want to make sure your state filing is compliant through a complex tax situation. Having this pertinent tax information will allow you to deviate CBD-related expenses and regulatory compliances that may be linked to the potency of the products you’re selling and any previous years of having put CBD products on your shelves. Don’t hesitate to reach out to a tax professional to get insight into a complex return to give yourself a good night’s sleep.