Colo. Code Regs. 39-28.8-302
Current through Register Vol. 47, No. 23, December 10, 2024
Rule 39-28.8-302 - Retail Marijuana Excise TaxBasis and Purpose. The bases for this rule are §§ 39-21-112(1), 39-28.8-101, 39-28.8-301, 39-28.8-302, and 39-28.8-308, C.R.S. The purpose of this rule is to provide guidance regarding the imposition and calculation of retail marijuana excise tax and the record keeping requirements therefor.
(1)Incidence of Tax. The Excise Tax is imposed upon the Retail Marijuana Cultivation Facility, which shall pay the Excise Tax to the Department on the first Transfer of Retail Marijuana to a Retail Marijuana Store or a Retail Marijuana Product Manufacturing Facility. No Excise Tax is imposed on the Transfer of Retail Marijuana from one Retail Marijuana Cultivation Facility to another Retail Marijuana Cultivation Facility. In the case of such Transfer, the Excise Tax is imposed on the subsequent Transfer of the Retail Marijuana to a Retail Marijuana Store or a Retail Marijuana Product Manufacturing Facility.(2)Exempt Transfers. The Transfer of Retail Marijuana to a Retail Marijuana Testing Facility for testing purposes is exempt from Retail Marijuana Excise Tax so long as the marijuana is destroyed by the Retail Marijuana Testing Facility during or following the testing.(3)Inventory Tracking System. When a Transfer is entered into the Inventory Tracking System, all Transfers between Unaffiliated Retail Marijuana business licensees must be entered in a manner that allows the contract price to be recorded in such Inventory Tracking System. The contract price recorded in the Inventory Tracking System must be the actual contract price as described in paragraph (4)(b) of this rule.(4)Calculation and Payment of Tax.(a) The method for calculating Retail Marijuana Excise Tax depends on the relationship between Retail Marijuana business licensees.(i) Transfers from Retail Marijuana Cultivation Facilities to Unaffiliated Retail Marijuana Stores or Unaffiliated Retail Marijuana Product Manufacturing Facilities. (A) If the first Transfer from a Retail Marijuana Cultivation Facility is to an Unaffiliated Retail Marijuana Store or Unaffiliated Retail Marijuana Product Manufacturing Facility, the Excise Tax is calculated based on the actual contract price, as defined in paragraph (4)(b) of this rule, of the Retail Marijuana Transferred.(B) If no contract price is established at the time of the first Transfer referenced in paragraph (4)(a)(i)(A), the Excise Tax is calculated based on the Average Market Rate of the Retail Marijuana Transferred. Examples of such Transfers include: (I) a temporary Transfer, which does not constitute a sale, of Retail Marijuana from a Retail Marijuana Cultivation Facility to an Unaffiliated Retail Marijuana Product Manufacturing Facility that will process or manufacture the Retail Marijuana before returning it to the Retail Marijuana Cultivation Facility or to a Retail Marijuana Store Affiliated with the Retail Marijuana Cultivation Facility; or(II) a Transfer of Retail Marijuana from a Retail Marijuana Cultivation Facility to an Unaffiliated Retail Marijuana Store for which a price is not established at the time of Transfer, but instead depends upon the revenue generated from the subsequent sale of the Retail Marijuana to the end consumer.(ii) Transfers between Unaffiliated Retail Marijuana Cultivation Facilities of Retail Marijuana Harvested for Sale or for Extraction. (A) If the first Transfer of Retail Marijuana is between Unaffiliated Retail Marijuana Cultivation Facilities, the Excise Tax is calculated based on the contract price, as defined in paragraph (4)(b) of this rule, provided the Retail Marijuana had, at the time of Transfer between Unaffiliated Retail Marijuana Cultivation Facilities, been harvested for sale at a Retail Marijuana Store or for extraction by a Retail Marijuana Product Manufacturing Facility, and underwent no further cultivation following the Transfer between Unaffiliated Retail Marijuana Cultivation Facilities.(B) The Excise Tax calculated pursuant to paragraph (4)(a)(ii)(A) of this rule shall be imposed on the first Transfer of the Retail Marijuana from the Retail Marijuana Cultivation Facility to a Retail Marijuana Store or Retail Marijuana Product Manufacturing Facility.(C) If no contract price is established prior to the first Transfer between Unaffiliated Retail Marijuana Cultivation Facilities, the Excise Tax is calculated on the Average Market Rate at the time of the Transfer. An example of such a transfer includes, but is not limited to: (I) a transfer of Retail Marijuana between Unaffiliated Retail Marijuana Cultivation Facilities for which a price is not established at the time of Transfer, but instead depends on the revenue generated from the subsequent Transfer to a Retail Marijuana Store or Retail Marijuana Product Manufacturing Facility.(iii) Affiliated Retail Marijuana business licensees.(A) Except as provided in paragraph (4)(a)(ii) of this rule, if the first Transfer from a Retail Marijuana Cultivation Facility is to an Affiliated Retail Marijuana Store or an Affiliated Retail Marijuana Product Manufacturing Facility, the Excise Tax is calculated based on the Average Market Rate of the Retail Marijuana Transferred.(b)Contract Price. The contract price is the invoice price charged by a Retail Marijuana Cultivation Facility to each licensed purchaser for each Transfer of Unprocessed Retail Marijuana, exclusive of any tax that is included in the written invoice price, and exclusive of any discount or other reduction. In the case of multiple invoices reflecting multiple prices for the same transaction, the contract price used to calculate the tax is the highest such price. For the purpose of this paragraph (4)(b), the invoice price charged includes all consideration the seller receives from the buyer in whatever form and regardless of the time of receipt.(c)Calculation of Average Market Rate. The Department will calculate the Average Market Rate using reported sales of each category during the Test Period. The Department will determine the best methodology to arrive at the Average Market Rate. The Department may, from time to time, change its method of calculating the Average Market Rate if, in the judgment of the Department, such change is necessary to arrive at the most accurate Average Market Rate given the market conditions.(d) In the case of Retail Marijuana Excise Tax calculated using Average Market Rate, the Excise Tax shall be calculated based on the category of Retail Marijuana (i.e., Bud, Trim, Immature Plant, Wet Whole Plant, Seed, Bud Allocated for Extraction, or Trim Allocated for Extraction) being Transferred. The provisions of this paragraph (4)(d) apply only to Excise Tax calculated using Average Market Rate. (i) For the categories of Bud, Trim, Bud Allocated for Extraction, and Trim Allocated for Extraction, the Excise Tax is computed on the total weight of the Retail Marijuana Transferred. If multiple categories of Retail Marijuana are included in the Transfer, the Excise Tax shall be calculated separately for each category of Retail Marijuana included in the Transfer by separately calculating the total weight of the Retail Marijuana included in each category and multiplying the weight by the Average Market Rate of each category and the applicable Excise Tax rate. Notwithstanding this rule, inconsequential amounts of Bud inadvertently included in a Transfer that is otherwise Trim shall be treated as Trim and not as Bud.(A) Retail Marijuana categorized for the purpose of Excise Tax calculation as Bud Allocated for Extraction or Trim Allocated for Extraction may not be subsequently Transferred for direct sale to consumers unless it has first been subject to extraction as allocated.(B) If Bud Allocated for Extraction or Trim Allocated for Extraction is subsequently Transferred for direct sale to consumers and has not been subjected to extraction, the Retail Marijuana Cultivation Facility shall amend the Retail Marijuana Excise Tax Return upon which the Excise Tax was initially paid in order to recalculate the Excise Tax, and any applicable penalty and interest, using the Average Market Rates for the category of Bud or Trim, respectively.(C) The Retail Marijuana Product Manufacturing Facility shall notify, in writing, the Retail Marijuana Cultivation Facility of any subsequent Transfer of Bud Allocated for Extraction or Trim Allocated for Extraction that has not first been subjected to extraction within seven (7) days of the Transfer by the Retail Marijuana Product Manufacturing Facility. Any failure by a Retail Marijuana Production Manufacturing Facility to notify a Retail Marijuana Cultivation Facility in accordance with this paragraph (4)(d)(i)(C) shall not relieve the Retail Marijuana Cultivation Facility of liability for any additional tax, penalty, and interest due pursuant to paragraph (4)(d)(i)(B) of this rule.(ii) The Retail Marijuana Excise Tax for Immature Plants is calculated on the total number of Immature Plants being sold or Transferred.(iii) The Retail Marijuana Excise Tax for Wet Whole Plants is calculated on the total weight of the entire Retail Marijuana Wet Whole Plant. The weight of the entire Retail Marijuana Wet Whole Plant is subject to the Excise Tax because the Average Market Rate for Wet Whole Plant already reflects an allowance for water weight and waste. The Wet Whole Plant may not undergo any further processing (i.e., drying the plant and subsequently selling separately the Bud and Trim) prior to being weighed when using the Wet Whole Plant basis. The Wet Whole Plant must be harvested and packaged in the same day. (A) The Retail Marijuana Wet Whole Plant must be weighed within 2 hours of the plant being harvested and without any further processing, including any artificial drying such as increasing the ambient temperature of the room or any other form of drying, curing, or trimming. The Retail Marijuana Excise Tax must be calculated and paid on the total Wet Whole Plant weight. If the Wet Whole Plant is not weighed within 2 hours of being harvested or is subjected to further processing before being weighed, the Excise Tax on such plant cannot be calculated and paid on the Wet Whole Plant basis and must instead be calculated and paid at the Bud and Trim rates.(B) A Retail Marijuana Cultivation Facility that calculates and pays the Excise Tax using the Wet Whole Plant rate must maintain records of the time each Wet Whole Plant (identified by its RFID tag) was harvested and weighed and the weight of each Wet Whole Plant. The records must be in writing and created contemporaneously with the harvesting and weighing.(iv) The Retail Marijuana Excise Tax for seeds is calculated on the total number of seeds being Transferred.(v) The Retail Marijuana Excise Tax for Retail Marijuana Concentrate produced by a Retail Marijuana Cultivation Facility shall be calculated either pursuant to paragraph (4)(d)(i) of this rule based on the weight of Bud Allocated for Extraction and/or Trim Allocated for Extraction used in the extraction or pursuant to paragraph (4)(d)(iii) of this rule based on the weight of Wet Whole Plant(s) used in the extraction.(5)Evidence of Payment of Tax.(a) Both the Retail Marijuana Cultivation Facility and the first purchaser or transferee shall maintain documentation sufficient to determine the Excise Tax due for the Transfer. Such documentation must include:(i) the name and license number of the Retail Marijuana Cultivation Facility,(ii) the name and license number of first purchaser or transferee,(iii) the category of Retail Marijuana Transferred,(iv) the date of Transfer,(v) the weight or quantity, as applicable, of the Retail Marijuana Transferred, and(vi) the contract price for the Transfer, if applicable.39 CR 11, June 10, 2016, effective 6/30/201640 CR 19, October 10, 2017, effective 11/1/201740 CR 23, December 10, 2017, effective 1/1/201842 CR 02, January 25, 2019, effective 12/18/2018, expires 4/17/201942 CR 06, March 25, 2019, effective 4/14/201944 CR 07, April 10, 2021, effective 4/30/2021 1. See §§ 29-2-114 and 32-1-1004, C.R.S. and the applicable local ordinance or resolution for information about the application of any local excise taxes to Retail Marijuana Transfers.