New York Cannabis Taxes

New York has a cannabis tax that is imposed both along the supply chain and to the end consumer under the adult-use regulation. New York’s cannabis tax structure is unique to most states, and cannabis tax is calculated by the milligrams of THC in the product. To make sure that you’re prepared when it comes to the different taxes in New York and how that can impact your cannabis business, here’s a quick overview of the tax.

Not all cannabis licenses in New York must pay tax, only a few. Only cannabis distributors and retailers (delivery and microbusinesses if selling direct to consumer) are required to collect and remit taxes. Below is a break down of the different cannabis taxes in New York under the adult use regulation.

  • Cannabis State Tax: tax imposed on the distributor based on the milligrams (mg) of total THC in the product.
  • State Excise Tax is imposed on the sale of cannabis products by a retailer to a cannabis consumer at nine (9) percent of the products’ price.
  • A local excise tax is imposed on the sale of cannabis products by a retailer to a cannabis consumer at four (4) percent of the products’ price.

How the tax is the cannabis state tax calculated?

The Cannabis State tax has different rates of tax for the different product types that a distributor sells. If the distributor sells flower, it is calculated at five tenths of one cent per milligram of the total THC listed on the product label. If the distributor sells concentrated cannabis, the tax is calculated at the rate of eight tenths of one cent per milligram of the total amount of THC as reflected on the product lable. And finally, if the distributor is selling a cannabis edible, the tax is calculated at the rate of three cents per milligram of the total amount of THC as reflected on the product label.

Cannabis Product Category Tax per MG of THC

Flower $0.005 / mg of THC

Concentrate $0.008 / mg of THC

Edible $0.03 / mg of THC

When assessing the tax calculation, it’s important to get crystal clear on a few things, which is how the State of New York cannabis regulation’s define THC (as this is the main driver of the TAX).

According to S854A, THC is defined as:

  • “THC” means Delta-9-tetrahydrocannabinol; Delta-8-tetrahydrocanna- binol; Delta-10-tetrahydrocannabinol and the optical isomer of such substances.
  • “Total THC” means the sum of the percentage by weight or volume measurement of tetrahydrocannabinolic acid multiplied by 0.877, plus the percentage by weight or volume measurement of THC.
  • Such regulations shall also require product labels to accurately display the total THC of each product.

This is the first time that I’ve seen Delta 8 listed as THC! This is an important distinction, as many businesses have operated under the grey zone of Delta 8. So if your business is selling Delta -8 products in NY, these products will be exposed to the tax.

Making sense of the tax

Although the tax is levied on the distributor, the entire supply chain will be impacted by the cannabis tax indirectly through price discounts and negotiations. The impact of the cannabis tax is higher on certain product categories and for those businesses that chose to sell higher THC products.

The financial impacts of the tax are serve, and if a business doesn’t look at its product margins carefully, price to profit, and run the numbers before hand, cash flow can be very tight. With IRC 280e and the higher costs of cannabis compliance, it’s important that if you are a business operating in New York that you have a strong financial game plan, financial foundation, and accounting controls in place to set your self up for success.

If you’re looking for best practices in cannabis accounting, make sure that you check out Cannabis Finance Bootcamp – which will give you access to tools, templates, and training on cannabis accounting.

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