Taxes, Fees, and Regulatory Reporting

New York dispensaries operate under four overlapping layers of financial compliance:

• OCM fees
• New York State taxes
• New York City taxes
• Federal taxes under Internal Revenue Code Section 280E

Each layer is enforced separately, with its own filing systems, deadlines, and penalties.
There is no central system tying them together, operators are responsible for keeping everything aligned.

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State Cannabis Taxes (New York)

Retail Cannabis Tax (13% total)

• 13% tax on the retail price of cannabis products
• Collected by the retailer at point of sale
• Remitted to the New York State Department of Taxation and Finance
• Includes:
  • 9% state share
  • 4% local share
• Must appear as a separate line item on receipts
• Filed quarterly (even if no sales)

Late or missing filings trigger penalties and interest and may impact licensing.

Note: This replaces earlier structures that referenced a 15% retail tax. The current framework is 13% retail excise.

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Potency-Based Tax (Wholesale Level)

Applies before product reaches the retailer:

• Flower: $0.005 per mg THC
• Concentrates: $0.008 per mg THC
• Edibles: $0.03 per mg THC

Paid by distributors but embedded in product cost, directly impacting margins.

New York State Sales Tax (13% total)

Separate from cannabis excise tax.

• 9% New York State
• 4% local jurisdiction

Retailers must:

• Collect sales tax on every transaction
• File the 20th after every quarter
• Remit payments on time
• Maintain supporting records for at least five years

Receipts must clearly separate:

• Product price
• Cannabis excise tax
• Sales tax
• Final total

Failure to separate taxes correctly is one of the most common audit triggers.

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New York City Local Taxes

Dispensaries operating in New York City are subject to additional municipal taxes.

New York City Business Taxes

• Unincorporated Business Tax for partnerships and LLCs
• General Corporation Tax for corporations

These obligations are often overlooked until the Department of Finance issues a notice.

New York City Filing Requirements

• Estimated tax payments
• Annual tax returns
• Business registration updates
• Address and ownership change filings

New York City audits cannabis businesses aggressively.

Federal Taxes (Internal Revenue Code Section 280E)

Because cannabis remains illegal at the federal level, Section 280E applies.

Dispensaries cannot deduct operating expenses, including:

• Rent
• Payroll
• Security
• Utilities
• Marketing
• Software
• Delivery
• Insurance

Only Cost of Goods Sold (COGS) is deductible, including:

• Product acquisition cost
• Transportation related to inventory acquisition
• Documented inventory shrinkage

The result is a significantly higher effective federal tax rate compared to non-cannabis retailers.

Sales Tax Compliance Requirements

Dispensaries must:

• Register for a Certificate of Authority
• Collect sales tax at the point of sale
• File returns based on assigned frequency
• File part-quarterly returns if required
• Produce records immediately upon audit request

Receipts must display:

• Product price
• Retail cannabis tax
• State and local sales tax
• Final total

OCM Fees and License-Related Payments

Application and License Fees

• Application fee paid at submission
• License fee paid upon approval

License fees are based on:

• License type
• Equity status
• Revenue
• Renewal classification

Premises and Ownership Changes

Fees may be triggered by:

• Location changes
• Layout modifications
• Ownership or control changes

Renewal Fees

• Due every two years
• Based on revenue and license type

Other Possible Payments

• Fingerprinting
• Background checks
• Corporate filings
• License amendments

All required fees must be paid before approval or renewal.

Required Regulatory Reports

Monthly and Quarterly Reporting

• New York State cannabis tax filings
• New York State sales tax returns
• METRC reporting (real-time)
• Waste and destruction logs
• Delivery logs
• Incident reports when applicable

Annual Reporting

• Corporate tax returns
• Ownership disclosures
• Employee demographic reporting under MRTA Section 88
• OCM annual submissions
• New York City tax filings
• Employment filings (W-2s and 1099s)
• Insurance and workers’ compensation renewals

Event-Based Reporting

OCM notification is required when:

• Ownership or control changes
• Loans or investments are received
• Security breaches occur
• Theft or loss occurs
• Cannabis is destroyed
• Fire or facility emergencies occur

Failure to notify is a violation.

Recordkeeping Requirements

Different records are governed by different agencies. You must follow each rule separately, not one universal timeline. However, cannabis compliance records (OCM/METRC) are the controlling standard for anything tied to product movement, inventory, or traceability. Where a record falls under more than one category, the longest retention period (5 years) applies.

In practice:

• Cannabis compliance records always require 5 years
• Financial, payroll, and tax records must be retained longer if they support cannabis compliance, audit response, or regulatory review

Retention Requirements by Record Type

Cannabis compliance (OCM / METRC) - 5 years
Must be retained for a minimum of five years. This applies to all seed-to-sale and regulatory traceability records, including inventory tracking, transport manifests, test results, packaging/labeling records, and OCM compliance documentation.

Payroll records - 4 years
Must be retained for at least four years under federal employment tax requirements. This includes wage records, tax withholdings, and payroll filings.

Federal tax records - 3 years (minimum)
Must be retained for at least three years from filing. This includes federal tax returns and supporting documentation. Longer retention may be required where underreporting, audit, or investigation applies.

New York State tax records - 3 years (minimum)
Must be retained for at least three years from the later of filing or due date. This includes sales tax filings and supporting records. Retention must extend if under audit or dispute.

New York City tax records - 3 years (minimum)
Must be retained for at least three years in line with state tax retention requirements. Extended retention applies where subject to audit or review.

Common Violations

Operators are frequently cited for:

• Late or missing tax filings
• Incorrect tax calculations on receipts
• Mislabeling cannabis tax versus sales tax
• Charging incorrect tax rates
• Failing to remit collected taxes
• METRC discrepancies
• Incomplete financial records
• Unreported income
• Improper Section 280E deductions
• Undisclosed financial activity

Most violations stem from documentation failures, not intent.

Why This Matters

Tax and reporting violations lead to:

• Fines
• Interest
• Audits
• License delays
• Enforcement actions
• Banking disruptions
• Personal liability exposure

Year-round compliance protects both the business and the license.

Go Here Next

• License Renewal and Ownership Changes
• Inspection and Audit Preparation
• Record-Keeping and Retention Rules
• Equity & Reporting

Source Material

• MRTA Section 85
• MRTA Sections 87 through 89
• New York City Department of Finance (UBT and General Corporate Tax)
• IRS Section 280E Guidance

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