Annual Report on Tax Exemptions for Medicinal Cannabis

Statutory Data Reporting Requirement. Chapter 837 of 2019 (SB 34, Wiener) established new tax exemptions for donations of medicinal cannabis. The law directs our office to submit an annual report containing data on three outcomes related to the exemptions: the number of medicinal cannabis patients served, the amount of medicinal cannabis products donated, and the amount of tax revenue lost. This report fulfills that statutory requirement for 2020.

Data Source. Our office obtained the data described below from the California Department of Food and Agriculture and the California Department of Tax and Fee Administration (CDTFA). The data come from the state’s Metrc “track and trace” system for licensed cannabis. In particular, the data reflect transactions that businesses identified as medicinal donations in calendar year 2020.

Number of Patients Served. In 2020, licensees identified 13,278 transactions as medicinal donations. The data do not tell us who received each donation. Some patients likely received more than one donation in 2020, so this total likely overstates the number of distinct patients. For example, if a patient received six donations in 2020, then the transaction total includes that person six times.

Amounts of Products Donated. As shown in Figure 1, licensees donated a wide variety of products in 2020. The top panel of the figure summarizes the total weight of donations whose weights were specified in the Metrc data. The bottom panel summarizes the number of donated packages whose weights were not specified.

Cultivation Tax Revenue Lost. CDTFA estimates that the 2020 revenue loss from the SB 34 cultivation tax exemption was roughly $400,000. Revenue from the cultivation tax goes to the Cannabis Tax Fund created by Proposition 64 (2016).

Use Tax Revenue Lost. CDTFA estimates that the 2020 revenue loss from the SB 34 use tax exemption was roughly $120,000. Revenue from the use tax goes to the state’s General Fund and to local programs.