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  • California’s Cannabis Taxes Are Getting Even Higher

Ever since the California government passed Proposition 64, or the Adult Use of Marijuana Act, with a 57% majority on November 8, 2016, cannabis has been recreationally available statewide. While many parts of the state have embraced legalization by building dispensaries, launching delivery services and even opening the country’s first cannabis cafe, large swaths of the state remain less welcoming to the legislation. Many counties and municipalities force cannabis dispensaries and businesses to operate in the shadows, in unmarked buildings with rooms with no air conditioning and check-in windows akin to those of vehicle impounds. 

 

California's legal cannabis market faces another challenge as the California Department of Tax and Fee Administration (CDTFA) announced in late November that it plans to once again raise taxes on marijuana sales and cultivation. The state’s current taxes on recreational sales have already assisted in the resurgence of the black market which offers significantly lower price points. The tax increase is widely seen as another blow to the law-compliant market and fears that consumers will turn to illicit sales with more affordable price points continues to rise. 

 

The CDTFA describes its mission as “to make life better for Californians by fairly and efficiently collecting the revenue that supports our essential public services.” However, according to the administration’s website, “an analysis of statewide market data was used to determine the average mark up rate between the wholesale cost and the retail selling price of cannabis and cannabis products. Based on this analysis, effective January 1, 2020, the newest markup rate will be at 80%.”

 

“The reason the black market continues to exist is that taxes are too high,” says Jay Handal, co-owner of Erba Markets. “People are looking for the best value, and the government, both state and city, are woefully poor at shutting down black market stores. Raising taxes will only exacerbate the situation by continuing to keep black market store prices ridiculously lower than legal dispensaries that carry tested products.”

 

In addition to an increase in cannabis sales tax, as of January 1, 2020, taxes on dried marijuana flower per ounce will increase from $9.25 to $9.65, while dried leaves per ounce will increase from $2.75 to $2.97. Cannabis plant tax will increase from $1.29 to $1.35 per ounce. Rates apply to marijuana that a cultivator sells and transfers to a distributor or manufacturer.

 

“The latest tax hike is disappointing news as both a consumer and an operator,” says Leone Posod, CEO of Treat Yourself, a CBD skincare company. “I fear that this increase will do nothing more than strengthen the illicit market since the regulated market is already expensive as it currently stands. We are in the process of moving our business out of California because it simply does not make financial sense for us to operate here, no matter how much we want to. I hope that the many California cannabis businesses that I support and admire will pay close attention to how this increase affects their operating expenses and make the necessary adjustments to stay in business. Too many incredible California cannabis businesses have been priced out in the last two years, we can’t afford to lose anymore.”

 

While throughout the country and across the world, California is seen as a state on the forefront of the marijuana movement, upon closer examination, regulations tend to tell a different story.

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California’s Cannabis Taxes Are Getting Even Higher
2 Comments
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provisional_air 2 years ago
Such a hard balance. Good luck California, you got this!
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Bella1 2 years ago
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