Cannabis' Possible Rescheduling to Schedule III: What This Could Mean

If you’re running a New York cannabis microbusiness, taxes can feel overwhelming. Between excise taxes, retail taxes, and reporting requirements, it’s taxing (pun intended)—especially when you’re trying to focus on growing your brand.

This guide breaks down the basics in layman’s terms, so you know what to expect and how to stay compliant without drowning in paperwork.

Why Cannabis Taxes Are Different for Microbusinesses

Here's the simple breakdown:

• Retail Excise Tax: 13% on every cannabis product sold directly to consumers.
• Distributor Excise Tax: 9% applied in two ways:
  • On sales to third-party retailers (based on wholesale price).
  • On sales through your own retail outlet (calculated as 9% of 75% of the retail sales price).
• General Sales Tax: Cannabis itself is exempt. However, if you sell non-cannabis goods, such as rolling papers, apparel, or accessories, standard sales tax still applies (state 4% + local rate).

Read N.Y. Tax Law § 493(a)(1)

What This Means at the Point of Sale

The key is configuring your POS system and accounting software correctly so that nothing slips through the cracks.

Let’s put it in everyday terms:

• When you sell cannabis directly to customers, your POS needs to calculate 13% retail excise tax.

• If you’re selling branded T-shirts or grinders, you’ll collect standard sales tax on those items.

• If you transfer products to another retailer, that transaction triggers the 9% distributor excise tax.

• And if you sell cannabis through your own store, you apply the special 9% distributor tax on 75% of the retail price.

Who Handles What Inside the Business

Keeping compliant isn’t a one-person job. Typically, roles and responsibilities break down like this:

• Finance Manager: Oversees compliance and reviews filings.

• Retail Manager: Ensures the POS is calculating taxes accurately.

• Accountant: Prepares schedules, reconciles financial records, and files tax returns.

• Owner/Controller: Approves payments and filings.

This “checks and balances” approach prevents errors and keeps your microbusiness protected.

Tracking & Reporting Taxes in Flourish

If you’re using Flourish Software for your seed-to-sale software, here’s how it works:

1. Configuration: 

   • The Distributor Excise Tax is calculated by default. Flourish provides two configurations: 
     • Calculate excise tax on ordered qty (vs. allocated): Useful if you want to provide estimates before shipping. 
     • Disable automatic excise tax calculation: Turn this off to compute tax liability manually.
   • Flourish configures Retail Sales Taxes.
     • Users can not edit these.
     • Sales Tax is computed based on the retail store’s address

2. Transaction Capture:

   • At Wholesale:

     • Only compute the Distributor Excise Tax when the sale or transfer is to a 3rd party retailer where the microbusiness acts as the distributor.
     • Record the sale price.
     • A user can uncheck the excise tax box on an order to remove the estimated tax calculation.
     • The Flourish application calculates the standard Distributor Excise Tax (9% x sales price)

   • At Retail: 

     • Record sale price.
     • Calculate Retail Excise (13% × sale price) on cannabis goods sold and collect at the time of purchase.
     • Calculate the Sales Tax (State 4% + local rates) on non-cannabis goods sold  and collect at the time of purchase.
     • Display the Excise and Sales tax on the receipt
     • The POS records each tax liability separately.
       

   • Retail Refunds

     • Refund both the retail excise and the sales tax.
     • Maintain refund documentation to support reversal.

3. Reconciliation: Weekly reports summarize liabilities so your accountant can book them properly into QuickBooks (or your accounting system).

4. Quarterly Prep: Flourish tax liability reports make it easy to calculate total excise, retail excise, and sales tax—minus returns.

5. Filing & Payment:

   • Frequency: Quarterly (due 20th of the month following quarter).
   • Platform: NYS Web File – Adult-Use Cannabis Excise Tax portal.
   • Payment: Must authorize bank debit (remove debit blocks if applicable).
   • Zero Sales: If no sales occurred, file a zero return.

Filing Deadlines You Can’t Miss

• Quarterly filings are due on the 20th of the month after the quarter ends.

• Payments must be made via bank debit (double-check that debit blocks are removed).

• Keep all documentation—including POS exports, refund logs, and tax schedules—for at least six years in case of audit.

Risk Management: Staying Ahead of Compliance Issues

To minimize risk:

• Have your accountant prepare filings, but require manager/owner approval before submission.

• Run a variance analysis each quarter to flag anything unusual in your sales or tax reports.

• Always keep dual documentation (Excel + PDF) for every report to ensure backup proof.

Final Takeaway

Taxes may feel like the least exciting part of running a cannabis microbusiness, but they’re one of the most critical. By using cannabis-specific software like Flourish and setting clear internal processes, you can simplify compliance, avoid costly mistakes, and focus on what matters most: building your business and serving your customers.

💡 Pro Tip: If you’re not sure whether your POS and accounting are properly configured for New York cannabis excise taxes, it’s better to find out now than face penalties later.  FlourishSoftware is built for cannabis compliance, doing the heavy lifting so you can stay focused on growth.

Ready to see how it all works?

Schedule a personalized demo to see how Flourish helps our New York microbusinesses operate with clarity, adapt to change, and focus on growth.