California has adopted a new environmental recycling fee that applies to products containing embedded batteries that cannot be easily removed using common household tools. The goal of this fee is to fund the safe collection and recycling of batteries that would otherwise be disposed of improperly.
For cannabis retailers, this primarily impacts all-in-one vape products, which typically contain batteries that meet the definition of “embedded.” Retailers are responsible for registering with CDTFA, collecting the fee from customers, and remitting it according to CDTFA requirements.
Because this fee is not a traditional sales tax, it may interact differently with other cannabis taxes. It is important to understand both the fee and how to configure it in your point-of-sale system.
Effective date
January 1, 2026
What products are involved
Products containing a covered battery that is embedded
A battery is considered embedded if it cannot be easily removed using common household tools
This includes most all-in-one vape devices
Who must collect the fee
Retailers selling covered products to California consumers
Retailers must register with CDTFA to collect and remit the fee
Fee amount
1.5% of the retail price paid by the consumer
Maximum fee: $15 per unit
(This effectively caps the fee at products priced ~$1,000+)
Retailer allowance
Retailers may retain 3% of the fee collected to offset administrative costs
The remaining amount must be remitted to CDTFA
What the fee is (and is not)
This is not sales tax.
CDTFA treats this as a covered electronic waste recycling fee.
CDTFA guidance does not clearly state whether this fee constitutes gross receipts for other tax calculations, which is why implementation matters.
What This Means for Cannabis Retailers
Most all-in-one vapes will be subject to the fee
Retailers must:
Register with CDTFA
Charge the fee at checkout
Track and remit the fee separately
POS configuration matters to avoid:
Over-collecting
Incorrect tax compounding
Audit exposure
How to Handle the Fee in Meadow (Recommended Approaches)
Because this fee behaves differently than standard cannabis taxes, configuration depends on how a retailer wants the fee to interact with other taxes.
Option 1: Standalone Fee Category (Simplest & Safest)
Best for retailers who want clarity and minimal risk
Create a dedicated product category for covered battery embedded devices
Apply a Tier 1 tax/fee set to 1.5%
This treats the fee as:
Separate
Transparent on receipts
Easy to report and audit
Various tax authorities have determined on multiple occasions that fees should be included in gross receipts for purposes of calculating taxes. This approach avoids any risk assumed by not including the fee in taxable gross receipt.
Option 2: Non-Compounding Fee (Last Tax Tier)
For retailers who do NOT want the fee compounded by other taxes
Place the fee in the final tax tier
Important: taxes in later tiers compound earlier taxes
To net out to exactly 1.5% of the product price, the fee percentage must be adjusted
Example adjustment
If a retailer has:
Tier 1 tax: 10%
Tier 2 tax: 15%
To end up with a true 1.5% fee on the product price, the configured rate must be:
1.5% ÷ 1.15 ÷ 1.10 = 1.1858%
This ensures the compounded result equals 1.5% of the original product price.
⚠️ This method requires careful math and should be reviewed with a tax professional.
Important Considerations
Meadow does not provide tax advice; Please reach out to your CPA before moving forward.
Retailers should:
Confirm whether the fee should be treated as gross receipts with their CPA or CDTFA
Validate their configuration before January 1, 2026
Meadow supports:
Category-level tax logic
Tiered tax configurations
Transparent fee display at checkout