Clarifies the Cannabis Excise Tax Exemption for Medical Patients



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To:       Cannabis Licenses

Fr:        Justin Nordhorn, Director of Policy and External Affairs

Re:      Additional Guidance on the Practical Implementation of SHB 1453 

On May 20, I issued guidance on the implementation of SHB 1453, providing a tax exemption for medical cannabis patients. That message is available here [ [link removed] ], for reference.

 

Since that message, the Liquor and Cannabis Board (LCB) has received additional questions and requests for formal guidance in advance of the June 6, 2024 effective date. To help provide clarity we have provided an additional guidance document, linked below. 

 

*LCB Formal Guidance*

At the request of the industry, the Liquor and Cannabis Board (LCB) produced this Cannabis Excise Tax Exemption Guidance [ [link removed] ]. Please use this to supplement the infographic and other guidance supplied on May 20 to help remain compliant with the excise tax exemption.

 

*Dept. of Health Q and A*

Additionally, we worked with the state Dept. of Health on questions specific to the medical cannabis program and its regulations. Below are some questions we received and the Dept. of Health’s response.

*Question*

While a retailer is able to verify whether or not a patient is in the registry, they are unable to verify that the original medical authorization from the provider is authentic. In other words, if a patient walks into a medically endorsed store with a medical authorization from a provider, the store will make that patient a card and put them into the registry. There is no process or ability for the retailer to communicate with the physician to ensure that the medical authorization form is authentic, furthermore if retailer 1 puts a patient into the registry and issues the patient a card and then that patient uses their card at another medically endorsed store (retailer 2) and requests a tax exemption. Retailer 2 can verify that the patient is in the registry but they cannot verify that the card was issued to the patient in a compliant manner.

So this question is for the purpose of executing this tax exemption at the point of sale, does the retailer have any responsibility to ensure that the card was issued in a compliant manner or do they just need to confirm that the patient is in the registry?

 

*Dept. of Health Answer *Just a note regarding the authorization verification: The cannabis consultant is the one that is expected to ensure the authorization is on the correct form and completed in full. (WAC 246-71-020(5)). We (Dept. of Health) are working on a resource guide for retailers and consultants to help them verify the authenticity of a form. If any part of the form is left incomplete, or if the form appears invalid, the consultant is to instruct the patient and/or DP (Designated Provider) to go back to the medical professional.

 

*Question*

In the event of an audit, how can a retailer verify that a sale was made to a patient that was in the registry at the time of the sale, if that patient is no longer in the registry? Cards have an expiration date, and someone may choose to not renew their medical authorization. If a retailer makes a sale and is audited three years later and that patient is no longer in the registry, how can they prove that they were in the registry at the time of the transaction?

 

*Dept. of Health Answer*

Currently DOR receives a report of all card numbers, the date the card was issued, the date expired (if applicable) and date verified at which store. The tax reporting structure allows for records to reflect cards that are both active and expired. RCW 69.51A.230(1)(f) requires the database to provide information and reports to DOR for tax exemption verification. The information sent to DOR includes both active and expired recognition cards and the date the card was scanned at the store. So even if a card is expired, the card number and use history is retained for the purposes of tax exemption.

 

*Question*

Does the sales tax exemption still exist for patients with a medical card? And if so, could you clarify when it applies? Is it on the sale of non DOH compliant products? If it is a DOH compliant product does the patient receive an excise tax exemption and a sales tax exemption?

 

* **Dept. of Health Answer*

The DOH policy that clarifies compliant product as any product purchased by a registered patient will remain in effect even after the effective date of HB 1453.


* Registered patients who purchase any regulated product in a medically endorsed store qualify for the *sales and use tax exemption*.
* Registered patients who purchase DOH Medical Product (products with the additional testing requirements and the DOH logo attached) in a medically endorsed store qualify for the *excise tax exemption*.

The policy will be absorbed into the current (Dept. of Health) rule-making process for 246-70 WAC, and will clarify that any product purchased by a registered patient is eligible for the sales and use tax exemption. However, product purchased by a registered patient that meets the requirements of WAC 246-70-040 will also be eligible for the excise tax exemption.

Just for additional details: RCW 82.12.9998 and RCW 82.08.9999 provide an allowance for compliant product under the entire chapter of 246-70 WAC to be eligible for the sales and use tax exemption. For purposes of RCW 82.08.9888(1)(a) and 82.12.9998(1)(a), and in alignment with WAC 246-70-010, the department’s policy is any cannabis product purchased by qualifying patients possessing a recognition card is considered a “compliant cannabis product” as identified in chapter 246-70 WAC and is considered “beneficial for medical use.” HB 1453 further identified that medical products meeting the standard specifically outlined in WAC 246-70-040 are eligible for excise tax exemption.

Thank you for your review.

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