Why Insist on Resale Certificates for Wholesale Marijuana Transactions?

June 1st, 2020, Medical, Retail, State, Tax

Changes in Maine law effective December 13, 2018, allowed for caregivers and dispensaries to engage in wholesale transactions of marijuana and marijuana products with some restrictions (30% of annual yield, which was then increased to 75% in June 2019).  As a result, caregivers and dispensaries can sell at wholesale significantly more than they can in a retail transaction.  Any sales to patients are limited to 2.5 ounces per transaction (per day) for qualifying patients who are Maine residents.  Sales to patients from out of state are further limited: visiting patients may only purchase 2.5 ounces of marijuana over any two-week period.

If you are engaging in wholesale transactions of marijuana and marijuana products as a caregiver or dispensary, you likely already know that you must hold a retail certificate from the State of Maine to pay the appropriate taxes on sales to patients.  However, you should also ensure that any caregiver or dispensary who is purchasing wholesale marijuana and marijuana products from your business has a valid resale certificate. 

If the individual or entity purchasing the wholesale marijuana (“Purchasing Retailer”) does not hold a resale certificate, then the caregiver or dispensary selling the wholesale marijuana (“Selling Retailer”) must charge sales tax on that transaction.  If the Selling Retailer does not charge such sales tax, the state can hold the Selling Retailer liable for the sales tax that should have been charged to the Purchasing Retailer. From a cannabis regulatory standpoint, this creates a potential issue.  Charging sales tax on wholesale marijuana transactions could make it appear as though the caregiver or dispensary exceeded the 2.5 ounce limit on marijuana retail sales.  Tax records that raise red flags inevitably lead to increased scrutiny from the Office of Marijuana Policy and other state agencies.

If you have questions about the tax implications of any marijuana-related transactions, please reach out to a member of Drummond Woodsum’s Tax  or Licensing and Regulatory Compliance division.