California governor signs tax break for cannabis businesses

Last Thursday, the governor of California signed a sweeping bill aimed at restructuring the state’s adult-use cannabis program, in particular by eliminating the tax on cannabis cultivation, with the aim of easing the burden on the industry and further reducing the illicit market.

The main provisions of the’AB 195 The regulations, which are taking effect, eliminate the tax on cannabis cultivation and shift the point at which the 15% excise tax on cannabis sales is collected and remitted from the distribution level to the retail level. Furthermore, there will be no increase in the excise tax for at least three years under the proposal, which is expected to be signed by the governor and take effect immediately.

The legislation also aims to take measures to strengthen law enforcement against unlicensed operators. For example, property managers who knowingly rent space to a business that illegally manufactures, stores, or sells cannabis will be subject to civil penalties of up to $10,000 per day per violation. County governments may also bring civil actions against unlicensed growers. in the event of water pollution or diversion.

The cannabis companies Businesses participating in the social equity program will be eligible for a tax credit of 10,000 $ under the bill, and they will be able to retain 20 % of the excise tax revenue from their cannabis sales to reinvest in their business.

The legislation also allocates approximately $670 million in cannabis taxes to education, substance abuse treatment for youth, school retention, environmental cleanup and remediation related to illicit cannabis production, and law enforcement.

California has taken in nearly 4 billion dollars in cannabis-related tax revenue since launch of the adult-use market in the state in 2018.