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CDTFA Tax Audits

Los Angeles CDTFA Tax Audit Lawyers

Tailored Strategies for Tax Audits

The California Department of Tax and Fee Administration (CDTFA) administers various taxes and fees across California, including those related to cannabis. CDTFA oversees various tax programs, including sales and use taxes, and special taxes and fees. Specifically concerning cannabis, CDTFA is responsible for the collection and regulation of cannabis taxes, ensuring compliance within the industry.

Tax audits conducted by the CDTFA are initiated when the agency suspects that a business has understated its reported sales and most recently when cannabis is discovered as a result of a criminal investigation. The CDTFA attempts to collect cannabis excise tax related to any cannabis discovered or believed to have been grown or sold as a result of their investigations. These audits are crucial for maintaining tax integrity and fairness across the board and have escalated due to the proliferation of the black market.

At Shevin Law Group, we understand the complexities and challenges that individuals and businesses face, particularly in navigating tax audits. With our firm's extensive experience and insights into cannabis law, we are at the forefront of the industry and have successfully defended CDTFA and related audits numerous times.  Our team serves individuals and businesses throughout California, providing comprehensive legal support across all aspects of cannabis taxation. We protect our clients during tax audits, offering personalized strategies tailored to their needs and circumstances.

Contact our Los Angeles CDTFA tax audits attorneys at (818) 918-5838 and learn more about how we provide support through this complex process.

Cannabis Excise Tax Obligations for Retailers

Excise taxes are levied on the sale of specific goods or services, often imposed at the point of sale or production. In the cannabis industry, retailers must report and remit cannabis excise tax to the CDTFA. This tax serves as a crucial source of revenue for the state and is earmarked for various public services and initiatives.

Obligations for Cannabis Retailers

Cannabis retailers are responsible for collecting and remitting a cannabis excise tax from their customers. This tax is calculated based on the gross receipts generated from the retail sale of cannabis or cannabis products. 

Gross receipts encompass the following:

  • The selling price of the cannabis or cannabis product 
  • Additional retail expenses passed onto the customer
  • Delivery fees
  • Service charges
  • Packaging costs

Retailers must diligently track and account for all relevant sales transactions to fulfill their tax obligations per state regulations.

Navigating CDTFA Tax Audits

The CDTFA conducts tax audits to assess whether businesses have paid the correct amount of taxes in compliance with state regulations. During these audits, the auditor scrutinizes sales and purchase records to ensure accuracy and transparency in tax reporting.

Red flags for auditors may include the following:

  • Failure to report sales and use tax
  • Consistent late filings
  • Significant changes in business operations

The CDTFA focuses on various aspects of tax compliance during audits. The auditor may verify the reported gross receipts to ensure that all income is accurately accounted for. They may also examine business expenses, including business equipment and supplies costs. Additionally, the auditor may check that the tax rates were adequately applied and local taxes were correctly allocated.

Audit Findings

Following the audit process, the auditor will hold a conference with the business owner and their representative to discuss the findings. The auditor will then prepare a comprehensive report outlining the outcome, including whether the business owes additional taxes. If the business owner disagrees with the audit results, they can provide further information and arguments to support their position.

Turning to a Lawyer for Help

Shevin Law Group remains at the forefront of the legal landscape surrounding cannabis business operations, including taxation matters. Our seasoned team understands the intricate regulations governing the cannabis sector, enabling us to provide comprehensive support in business formation, compliance, and taxation issues. 

When business owners are confronted with CDTFA audits, our insights allow us to assist them in effectively navigating the complexities of the process. We offer valuable guidance in articulating disagreements with audit findings and diligently gather the necessary documentation to substantiate our clients' claims.

If your cannabis business faces a CDTFA audit or requires comprehensive legal support in navigating taxation issues in Los Angeles, call us at (818) 918-5838 or contact us online to schedule a consultation.

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