Why prohibit free samples ??

[Cosmic Dude]

In California's Prop 64 which legalized sales in Nov 2016, it states:

"26153. [No Give-Aways]
No licensee shall give away any amount of marijuana or marijuana products, or any marijuana accessories, as part of a business promotion or other commercial activity."

What is a possible rationale for this?

 

[arb]

So you cannot side step paying taxes.

 

[Tranquility]

So you cannot side step paying taxes.

While this may be the correct answer, the jury is still out on how it will be put into effect. Last week, I purchased from a fully licensed shop. During the transaction, they charged me 5 cents for a goodie bag.

The bag was filled with marijuana products and accessories.

 

[arb]

Which is exactly the type of advertising they wanted to prohibit.
No Budweiser type endorsements or advertising campaigns until the "correct"people take over production.........then it will change.......for them not us.

 

[Cosmic Dude]

So you cannot side step paying taxes.

Thanks for your reply.

So, is that a possible rationale, or was that the stated rationale of the Prop 64 creators?

( It seems to me that in regards to the tax issue that a) the business is taking a loss on the item, so it seems odd to tax a loss, and b) even disregarding a), then the rule could have instead been "All items given away by businesses as part of promotions, must be taxed as if they were sold at retail." Then the state gets the tax and the business get the promotional value. )

 

[Summer]

We'll this is the same with the tobacco industry. I used to collect the UPCs form Newport & Marlboro boxes & once a year send them in for rewards. They ran these for years. Well, about 10 years ago it became illegal for them to run them.

 

[Tranquility]

Thanks for your reply.

So, is that a possible rationale, or was that the stated rationale of the Prop 64 creators?

( It seems to me that in regards to the tax issue that a) the business is taking a loss on the item, so it seems odd to tax a loss, and b) even disregarding a), then the rule could have instead been "All items given away by businesses as part of promotions, must be taxed as if they were sold at retail." Then the state gets the tax and the business get the promotional value. )

If they give it away, it is not a "sales" tax but a "use" tax. That part is covered by free stuff. But, not the cannabis tax. An explanation is at:
http://blog.margolinlawrence.com/do-free-samples-get-taxed

...As a cannabis retailer, you must have the Bureau of Cannabis Control’s (BCC) authorization for the distribution of free cannabis samples. In terms of the taxation of these samples, the distributors of the samples do not have to pay the 15% cannabis excise tax on free samples. Instead, they must pay the Sales and Use Tax on the amount of free product given away.

The difference between the cannabis excise tax and the Sales and Use tax is that the former is a mandatory tax on all cannabis products, medicinal and recreational, while the latter is applied only to retail sales of cannabis. This means that when distributing free samples, instead of paying 15%, the distributor will pay the lesser Sales and Use Tax Rate, which is 9.5% for Los Angeles. The Sales and Use Tax Rates varying by location can be found on the CDTFA website. Cannabis brands can continue to give out free samples and pay a decreased tax rate, while customers can still enjoy complimentary samples.
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