Overview
The Washington State Liquor and Cannabis Board (LCB) has adopted new rule amendments to implement Substitute House Bill 1453 (SHB 1453), creating an excise tax exemption for qualifying medical cannabis patients. These amendments, effective October 12, 2024, modify three sections of Chapter 314-55 WAC and introduce a new section (WAC 314-55-090). SHB 1453 provides a significant benefit for medical cannabis patients, exempting them from the 37% excise tax under certain conditions until June 30, 2029.
Key Points of SHB 1453
SHB 1453, which became law in June 2024, offers an excise tax exemption for medical cannabis patients purchasing from licensed retailers holding a medical cannabis endorsement. To qualify for the exemption, the following conditions must be met:
- Retailer Endorsement: The sale must occur at a cannabis retailer with a medical cannabis endorsement.
- Patient Verification: The buyer must be a qualifying patient or designated provider with a recognition card issued by the Washington Department of Health.
- Compliant Cannabis Products: The products purchased must comply with standards set forth by the Department of Health and meet testing requirements outlined in WAC 246-70-040.
Record-Keeping Requirements
To ensure compliance with SHB 1453, cannabis retailers must maintain thorough records for each exempted sale. The required data includes:
– Date of sale
– Unique patient identifier and expiration dates from the patient’s recognition card
– SKU or unique product identifier of the exempted cannabis product
– Sales price of the exempted product
These records are crucial for auditing purposes to verify that the exemptions were properly applied. In the event of a dispute, if a retailer cannot produce the necessary documentation, the default assumption will be that the excise tax should have been collected.
Stakeholder Engagement and Feedback
Leading up to the adoption of these rules, the LCB held two virtual stakeholder engagement sessions in June 2024. These sessions gathered feedback from industry stakeholders, leading to important clarifications and adjustments in the rule language. A key concern raised was the proper distinction between SKU numbers and traceability numbers. The final rule allows for either to be used, addressing the need for flexibility in record-keeping.
Additionally, concerns about patient confidentiality were raised during the public hearing. As a result, the final rule includes explicit language to ensure that the confidentiality of patient information is maintained in accordance with RCW 69.51A.230.
Consequences of Non-Compliance
During the engagement process, stakeholders raised questions about what happens if a retailer incorrectly applies or fails to apply the tax exemption. The existing rule (WAC 314-55-089(4)(d)) clarifies that any excise tax collected in error must either be refunded to the customer or remitted to the LCB. This provision applies to cases where the excise tax exemption was not properly applied.
Implementation and Expiration
The excise tax exemption is in effect until June 30, 2029. To assist retailers in adjusting to these new requirements, the LCB has provided interim guidance and published an infographic explaining the exemption process. Retailers are encouraged to familiarize themselves with the updated record-keeping requirements and ensure they are prepared for potential audits.
Changes to Existing Rules
Several adjustments have been made to the existing sections of Chapter 314-55 WAC, including:
– WAC 314-55-087:Expanded record-keeping requirements for cannabis sales, even when excise taxes are not collected.
– WAC 314-55-089:Adjusted timeframes for record preservation from three years to five years, and removed outdated mailing address requirements to allow for future modernization.
Conclusion
The adoption of SHB 1453 represents a significant advancement in Washington’s medical cannabis program, providing meaningful financial relief to medical patients by exempting them from the 37% excise tax. The new rules establish clear guidelines for retailers, ensuring both compliance and accountability, while protecting patient confidentiality. As the LCB continues to engage with stakeholders, the rulemaking process reflects a commitment to meaningful progress in the state’s cannabis regulatory framework.
For more information or questions, please contact us at [email protected] or visit https://lawmera.cliogrow.com/book to book a consultation.