California’s Cannabis Businesses Continue to Struggle Under Federal Limitations
by Bethan Rose
California’s cannabis industry is acknowledged as one of the most profitable in the United States, with the industry yielding $333 million in cannabis taxes during the second quarter of 2021. However, state lawmakers are moving at a snail’s pace to lower cannabis taxes.
Cannabis industry taxation in California is starving companies of the opportunity to thrive, compete, and profit. The state’s hefty cannabis taxes are strengthening the illicit market, and to make matters worse, the cannabis excise tax will increase to 15% of the average market price for all cannabis retail sales by July 1, 2025.
Fortunately, in an attempt to reverse what Natalynne DeLapp, executive director of the Humboldt County Growers Association, describes as a “statewide issue,” local governments are pushing to provide cannabis businesses with the tax relief that they so rightly deserve.
Efforts to grant California’s cannabis companies with tax relief have escalated across various localities—including San Diego, Desert Hot Springs, Sonoma County, and Humboldt County—since local governments began channeling their energy into this area a few years back.
Ongoing advocacy efforts from local businesses, residents, and industry organizations have prompted California’s localities to extend tax relief to cannabis companies. California’s cannabis tax reductions have also emerged after experts, lawmakers, and licensed operators made allegations against the state for failing to adequately address tax reform issues—a situation that has been described as a “crisis” by many industry insiders.
Although Gov. Gavin Newsom (D) vowed to deal with tax reform back in January, he wasn’t exactly clear on the details. Nonetheless, progress has been made, with four state-level tax relief bills recently being introduced:
Currently, California’s business license holders must pay a state cultivation tax of $161 per pound of cannabis, in addition to a 15% excise tax and any taxes imposed by city and county officials.
So far, reports suggest that the following localities have already implemented, or are contemplating implementing, cannabis tax relief discounts:
Furthermore, a long list of California’s localities have approved resolutions urging the state to update its cannabis tax rules. They include the following:
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