830 CMR 64N.1.1 — Marijuana Retail Taxes

# (1)

Scope of Regulation; Background; Outline of Topics; Effective Date.
(a) Scope of Regulation. 830 CMR 64N.1.1 sets forth the rules for the imposition of the marijuana retail taxes on the retail sale of marijuana.
(b) B ackground. Re cent l egislation, kn own as "An Act to E nsure Sa fe Ac cess t o Marijuana," St. 2017, c. 55, authorized the licensing of marijuana establishments, including marijuana retailers, and the retail sale of marijuana. The legislation generally provides that all retail sales of marijuana by marijuana retailers are subject to up to three taxes imposed on the total sales price of the marijuana sold. First, marijuana retailers are required to collect and remit a marijuana excise imposed on their retail sales of marijuana. Second, marijuana retailers operating in cities or towns that have accepted the marijuana local tax option must also collect the marijuana local tax option at the rate imposed by the city or town, which may be set at a rate of no g reater than 3%. See M.G.L. c. 64N. Third, sa les of marijuana are subject to the sales tax. However, the sale of medical marijuana, as defined in 830 CMR 64N.1.1(2), is not subject to any of these taxes. 830 CMR 64N.1.1 explains the imposition of the marijuana retail taxes on retail sales of marijuana by marijuana retailers, exemptions from these taxes, and administrative provisions under M.G.L. c. 62C applicable to marijuana retailers, such a s record keeping requirements and the proc edures for filing returns a nd remitting payments.
830 CMR 64N.1.1 applies to all retail sales of marijuana by marijuana retailers occurring on or after June 1, 2021.
(c) Outline of Topics. 830 CMR 64N.1.1 is organized as follows:
1. Scope of Regulation; Background; Outline of Topics; Effective Date;
2. Definitions;
3. Marijuana Retail Taxes;
4. Sale and Delivery of Marijuana to Consumers;
5. Separate Statement Requirements for Marijuana Retailers;
6. Record Keeping;
7. Other Administrative Provisions.

# (2)

Definitions. For the purposes of 830 CMR 64N.1.1, the following terms have the following meanings:
Commissioner. The Commis sioner of Revenue or the Commissioner' s duly authorized representative.
Marijuana. All parts of any plant of the genus Cannabis, with certain exceptions, as defined in M.G.L. c . 9 4G, § 1. Ma rijuana a lso inc ludes all "marijuana pr oducts" a s d efined in M.G.L. c. 94G, § 1 and 935 CMR 500.002: Definitions. Such marijuana products include edible products, beverages, topical products, ointments, oils, and tinctures.
Marijuana Courier. As defined in 935 CMR 500.002: Definitions. A Marijuana Courier is a marijuana establishment licensed by the Cannabis Control Commission to make deliveries, but not sales, of mar ijuana directly to consumers on be half of a marijuana retailer. A Mar ijuana Courier is not a marijuana retailer.
Marijuana Delivery Operator. A s defined in 9 35 CMR 5 00.002: Definitions. A Marijuana Delivery Operator is a marijuana establishment licensed by the Cannabis Control Commission to make sales and deliveries of marijuana directly to consumers. A Marijuana Delivery Operator is a marijuana retailer.
Marijuana Establishment. A marijuana- related business licensed by the Cannabis Control Commission; provided, howeve r, that a medical marijuana tre atment ce nter or r egistered marijuana dispensary shall be treated as a marijuana establishment for the purposes of 830 CMR 64N.1.1.

Marijuana Establishment with a Delivery Endorsement. As defined in 935 CMR 500.002:
Definitions. A Marijuana Establishment with a Delivery Endorsement is a ma rijuana establishment that has received a "Delivery Endorsement," as defined in 935 CMR 500.002, to make sales and deliveries of marijuana directly to consumers. A Marijuana Establishment with a Delivery Endorsement is a marijuana retailer.
Marijuana Excise. The excise imposed pursuant to M.G.L. c. 64N, § 2.
Marijuana Local Tax Option. T he local tax option accepted by a city or town pursuant to M.G.L. c. 64N, § 3.
Marijuana Retail Taxes. Collectively, the taxes imposed on retail sales of marijuana, including the marijuana excise, the marijuana local tax option, and the sales tax.
Marijuana Retailer. A marijuana establishment licensed by the Cannabis Control Commission to purchase, deliver, sell, or otherwise transfer marijuana to consumers. A Marijuana Retailer is a "vendor" as defined in M.G.L. c. 64H, § 1 and M.G.L. c. 64I, § 1.
Medical Ma rijuana. M arijuana a uthorized to be so ld f or me dical use , as described in M.G.L. c. 94I.
Retail Sale. A sale of marijuana subject to the marijuana retail taxes.
Sale. Any transfer of title or possession of marijuana. Sale has the same general meaning as the terms "sale" and "selling" as defined in M.G.L. c. 64H, § 1.
Sales Price. The total amount paid by a purchaser to a marijuana retailer as consideration for a retail sale, including any amount paid for services that are a part of the sale. Generally, “sales price” has the same meaning as defined in M.G.L. c. 64H, § 1.
Sales Tax. The sales tax imposed pursuant to M.G.L . c. 64H, § 2 or the use tax impos ed pursuant to M.G.L. c. 64I, § 2.

# (3)

Marijuana Retail Taxes. Retail sales of marijuana are subject to as many as three taxes: the marijuana excise, the mar ijuana local tax option, and the sales tax. 830 CMR 64N.1.1(3) explains the general applicability and rules governing the imposition of each tax.
(a) Marijuana Excise. In general, all sales of marijuana by a marijuana retailer are retail sales subject to the marijuana excise. Howeve r, the following sales of ma rijuana are not subject to the marijuana excise.
1. Sales to a Marijuana Establishment. The marijuana excise does not apply to the sale of marijuana by a marijuana retailer to another marijuana establishment. To qualify for this exclusion, a marijuana establishment purchasing marijuana from a marijuana retailer must present its marijuana establishment license to the marijuana retailer demonstrating that it is a marijuana establishment at the time of sale.
2. Sales of Medical Marijuana. Sale s of medica l marijuana a re exempt from the marijuana excise. A purchaser must present his or her patient re gistration card, as defined in 935 CMR 500.002: Definitions, together with a valid government-issued identification card at the time of sale in order to qualify for the exemption. A marijuana retailer must verify at the time of sale that a purchaser is certified and registered with the Cannabis Control Commission.
(b) Marijuana Local Tax Option. In general, all retail sales of marijuana by a marijuana retailer operating in a city or town that has accepted the marijuana local tax option are subject to the marijuana local tax option. The marijuana local tax option is imposed in the same manner as the marijuana excise. Thus, marijuana is not subject to the marijuana local tax option when sold to another marijuana establishment or when sold as medical marijuana as described in 830 CMR 64N.1.1(3)(a). For the purpose of determining the application of the marijuana local tax option, marijuana retailers must source all retail sales of marijuana to the marijuana retailer's host community, as defined in M.G.L. c. 94G, § 1.

(c) Sales Tax. All sales of marijuana by a marijuana establishment, regardless of whether it is a marijuana retailer, are presumed to be retail sales subject to sales tax. However, sales between marijuana establishments may qualify as sales f or resale or a s exempt sales not subject to tax as explained in 830 CMR 64N.1.1(3).
1. Sales for Resale. A marijuana establishment selling marijuana to another marijuana establishment bears the burden of proving that a sale is a sale for resale, unless it takes a re sale c ertificate (F orm ST -4) f rom the purchasing ma rijuana e stablishment i n compliance with the g ood faith re quirements outlined in M.G.L . c. 64H, § 8( b) and 830 CMR 64H.8.1: Resale and Exempt Use Certificate. A marijuana establishment may not accept in good faith a resale certificate presented by anyone other than a marijuana establishment.
2. Sales Exempt from Sales Tax. In general, sales of marijuana may be exempt from sales tax pursuant to M.G.L. c. 64H, § 6 only when the sale meets one of the exemptions described in 830 CMR 64N.1.1(3)(c)2.a. through c.
a. Medical Marijuana. Sales of medical marijuana to a qualifying patient or the patient's personal caregiver that satisfy the requirements of 830 CMR 64N.1.1(3)(a)2.
are exempt from sales tax as prescription medication pursua nt to M.G.L. c. 64H,
§ 6(l).
b. Exe mpt Use. Sa les of marijuana may be exempt from sales tax pursuant to
M.G.L. c. 64H, § 6(r) when sold by a marijuana establishment to another marijuana establishment as materials that have a useful life of less than one year and which:
i. become an ingredient or component part of tangible personal property to be sold;
ii. are co nsumed directly and exclusively in an industrial plant in the actua l manufacture of tangible personal property to be sold;
iii. are consumed directly and exclusively in agricultural production; or iv. a re consumed directly and exclusively in research and development by a manufacturing corporation or a research and development corporation within the meaning of M.G.L. c. 63, § 42B.
To substantiate these sale s tax exemptions , the purc hasing marijuana establishment must present an exempt use certificate (Form ST-12) and its marijuana establishment license to the selling marijuana establishment at the time of sale. The burden of proving that the s ale of marijuana is ex empt from tax is on t he selling marijuana establishment, unless it takes an exempt use certificate in good faith in accordance with M.G.L . c. 64H, § 8(f) and 830 CMR 64H.8.1(5). A marijuana establishment may not accept in good faith an exempt use certificate presented by anyone other than a marijuana establishment.
c. Exempt Purchaser Marijuana Establishments. Sales of marijuana to a marijuana establishment that is exempt from taxation under IRC § 501(c)(3) and that intends to use the marijuana in the conduct of its religious, c haritable, educa tional, or scientific enterprise may be exempt from sales tax. To claim this ex emption, the purchaser must present its valid C ertificate of Exemption (Form ST-2), Sale s Tax Exempt Purchaser Certificate (Form ST-5), and its marijuana establishment license to the selling ma rijuana establishment at the time of sale . The selling marijuana establishment must retain both forms in the same manner as other marijuana retail tax records in accordance with 830 CMR 62C.25.1: Record Retention and 830 CMR 64N.1.1(5).
Marijuana establishments must collect sales tax on all transactio ns except as described in 830 CMR 64N.1.1(3)(c)2. Marijuana establishments may be entitled to additional sa les tax ex emptions not specified in 830 CMR 64N.1.1(3)(c )2.a.
through c. for purchases of non-marijuana tangible personal property that are used for one of the exempt purposes described in M.G.L. c. 64H, § 6.

# (4)

Sales a nd D eliveries o f M arijuana to Co nsumers. M arijuana e stablishments th at a re authorized by the Ca nnabis Con trol C ommission to s ell a nd de liver m arijuana dir ectly to consumers, including marijuana delivery operators and marijuana establishments with a delivery endorsement, are marijuana reta ilers subject to the registration, collection, and r emittance requirements under 830 CMR 64N.1.1. Marijuana establishments that merely deliver on behalf of a marijuana retailer, and do not sell, marijuana to consumers, including marijuana couriers, are not subject to the requirements under 830 CMR 64N.1.1. The following rules illustrate how the marijuana retail taxes apply to sales and deliveries of marijuana to consumers:
(a) Marijuana Sold and Deliver ed by Marijuana Deliver y Oper ators and Ma rijuana Establishments with a Delivery Endorsement. Marijuana delivery operators and marijuana establishments with a delivery endorsement are authorized to make sales and deliveries of marijuana direc tly to consumers a nd are marijuana reta ilers. I n a t ransaction wher e a marijuana delivery operator or a marijuana establishment with a delivery endorsement sells and delivers marijuana directly to a consumer, the marijuana delivery operator or marijuana establishment with a delivery license is required to collect and remit the marijuana retail taxes. Marijuana delivery operators and marijuana establishments with a d elivery endorsement must source sales and deliveries of marijuana to their same host community in the same manner as described in 830 CMR 64N.1.1(3)(b) for purposes of the marijuana local tax option.
(b) Marijuana Delivered by Marijuana Couriers. Marijuana couriers are authorized only to deliver marijuana to consumers on behalf of a marijuana retailer and not to sell marijuana directly to consumers. In a transaction where a marijuana courier delivers marijuana directly to a consumer on behalf of a marijuana retailer, the marijuana retailer, and not the marijuana courier, is required to collect and remit the marijuana retail taxes. In such a transaction the marijuana retailer m ust so urce su ch s ales a nd de liveries of marijuana to t he sa me ho st community in the same manner as described in 830 CMR 64N.1.1(3)(b) for purposes of the marijuana local tax option.

# (5)

Separate Statement Requirements for Marijuana Retailers.
(a) General Rule. All re tail sales of marijuana by a marijuana retailer are subject to the marijuana retail taxes, unless exempt as described in 830 CMR 64N.1.1(3), all of which are imposed o n th e tot al sa les p rice of the ma rijuana so ld. Al l ma rijuana re tailers must separately state each of the marijuana retail taxes from the total sales price of the marijuana on the receipt to the purchaser.
Marijuana retailers must also separately state the portion of the sales price attributable to sales of marijuana and to sales of other goods or services in amounts that reasonably reflect their retail value on the receipt to the purchaser. If the marijuana retailer does not follow this requirement, the marijuana retail taxes will be imposed on the total sales price of the entire transaction. The Commissioner may review transactions involving retail sales of marijuana tha t do no t r easonably re flect th e ma rijuana's r etail v alue pursuant to M.G.L. c. 62C, § 3A. Mar ijuana retailers must separ ately report sales of ma rijuana and non-marijuana taxable tangible personal property to the Commissioner.
(b) Example. Purchaser buys rolling papers, a t-shirt, and marijuana from marijuana retailer that opera tes in a city or town that has a ccepted the mar ijuana loc al tax option at the maximum rate of 3% . Mariju ana retailer separately states the sale s price f or the rolling papers, the t-shirt, and the marijuana on the receipt to purchaser and reports the sales prices of the items as $5.00, $20.00, and $100.00 respectively, which reasonably reflect their retail value. The t-shirt is exempt from tax as an article of clothing pursuant to M.G.L. c. 64H, § 6(k). The application of tax is as follows:

Sales Price - Rolling Papers $5.00
Sales Tax (6.25%) $.31
Total Tax Imposed $.31
Total Charge - Rolling Papers $5.31
Sales Price - T-shirt $20.00
Total Tax Imposed $.00
Total Charge - T-shirt $20.00
Sales Price - Marijuana $100.00
Marijuana Excise (10.75%) $10.75
Marijuana Local Tax Option (3%) $3.00
Sales Tax (6.25%) $6.25
Total Tax Imposed $20.00
Total Charge - Marijuana $120.00
Transaction Total $145.31
When filing its tax returns, marijuana r etailer must report the total sales pric e of the rolling papers on its sales and use tax return and the total sales price of the marijuana on its marijuana retail tax return.

# (6)

Record Keeping.
(a) Records Relating to Transactions by a Marijuana Retailer. Every marijuana retailer must maintain complete and accurate records of the gross receipts and expenditures from all purchases and sales, whether or not taxable, in accordance with 830 CMR 62C.25.1: Record Retention. In particular, every marijuana retailer must maintain:
1. a journal or its equivalent, which re cords daily all non-cash transactions affecting accounts payable;
2. a c ash jou rnal or its e quivalent, wh ich r ecords daily a ll c ash receipts a nd c ash disbursements, including any check transactions;
3. a sales slip, invoice, cash register tape, or other document evidencing the original transaction, which substantiates each entry in the journal or cash journal;
4. memorandum a ccounts, re cords or lists concerning i nventories, fixed assets or prepaid items, ex cept in ca ses wher e the a ccounting sy stem clea rly rec ords such information; and
5. a ledger to which totals from the journal, cash journal and other records have been periodically posted. The ledger must clearly classify the individual accounts receivable and payable and the capital account.
Marijuana retailers must provide such records to the Commissioner upon request.
(b) Rec ords Related to Tr ansactions Between Marijuana Establishments. All rec ords reflecting transactions between marijuana establishments must be maintained, including any Resale c ertificates, Ma rijuana Estab lishment P urchaser c ertificates, a nd Exe mpt Us e certificates.
(c) Separate Record Keeping Requirements for Sales of Tangible Personal Property. For record k eeping pu rposes, ma rijuana re tailers se lling bo th m arijuana a nd ta xable non-marijuana tangible personal property must maintain records that separately account for the two types of property.

(d) Required Use of Point-of-sale Systems. Marijuana retailers may only use point-of-sale
(POS) systems approved by the Cannabis Control Commission, in consultation with the Commissioner. All POS systems utilized by a marijuana retailer must record all transactions in a manner that will allow the Commissioner to verify gross receipts from sales of marijuana and non-marijuana sales and to validate any exempt sales. The manipulation of sales data recorded in a POS system through any means is prohibited and will be subject to:
1. the tax evasion penalties of M.G.L. c. 62C, § 73, including a felony conviction;
2. a fine of not more than $100,000 or $500,000 in the case of a corporation; or
3. by imprisonment by not more than five years, or both, and payment of the cost of prosecution.
(e) Other Records. Marijuana retailers must retain copies of all marijuana retail tax returns, as well as supporting data indicating how the figures in such returns were calculated, in accordance with 830 CMR 62C.25.1(7).

# (7)

Other Administrative Provisions.
(a) Reg istration. Marijuana r etailers must register with the Commissioner online using MassTaxConnect. As part of the registration process, marijuana retailers must provide their marijuana establishment license number. Once registered, marijuana retailers will be issued a Certificate of Registration by the Commissioner. Cer tificates of Registration must be displayed conspicuously in accordance with 830 CMR 62C.67.1: Display of Certificates of Registration.
(b) F iling Returns. Mar ijuana retailers are required to file a marijuana retail tax return reporting all gross receipts from the r etail sale of marijuana with the Commi ssioner on a monthly basis using the form prescribed. For tax periods beginning before April 1, 2021, returns are due on or before the 20th day of the following calendar month. Effective for tax periods ending on or after April 1, 2021, ret urns are due on or before the 30th day of the following calendar month. All returns must be filed with the Commissioner electronically.
(c) Remitting Payment. Payments must be remitted to the Commissioner electronically through MassTaxConnect on or before the due date of the return. For tax periods ending on or after April 1, 2021, marijuana retailers may also be subject to the advance payment rules in 830 CMR 62C.16B.1.
(d) Amended Returns/Abatement. A marijuana retailer seeking to increase or decrease its previously reported tax may submit an amended return to the Commissioner electronically through MassTaxConnect in accordance with 830 CMR 62C.26.2: Amended Returns. A marijuana ret ailer se eking to obtain an aba tement of a tax or penalty assessed by the Commissioner may dispute it by filing an application for abatement pursuant to 830 CMR