California to raise cannabis taxes (again)

California announced that taxes on the legal cannabis industry would increase after the New Year, despite numerous calls from the industry to is already struggling to combat the black market which is still twice the size of the legal market and amounts to $8.7 billion a year.

In a Special Note Through the California Department of Taxation and Tax Administration (CFTFA), the state announced several increases:

• Taxes on cannabis cultivation would be increased by more than 4%, an adjustment to account for inflation
• The tax on one ounce (28g) of dried cannabis flowers will increase from 9.25 $ to 9.65 $, a jump of 4.3%
• The tax on dried cannabis leaves will increase from 2.75 $ to 2.87 $, which also represents an increase of 4.3%
• The tax on one ounce of undried whole cannabis will increase from 1.29 $ to 1.35 $, a jump of 4.6%.

The memo also reveals an increase in the state’s margin rate on cannabis from 60% to 80%. The margin rate—the average difference between the wholesale price and the retail price of cannabis and cannabis-derived products—is used to determine the state’s excise tax on cannabis-derived products. Regulators are required to recalculate this margin every six months, based on data from the California market.

California's Industry Is Dissatisfied

In a press release, the California Cannabis Industry Association (CCIA) expressed its anger over this decision. «As California’s regulated market is on the verge of collapsing under the weight of taxes on cannabis consumers, local bans, burdensome regulations, slow growth, and a thriving illicit market, we believe that the CDTFA’s decision to increase the tax burden on legal cannabis operators runs counter to the development of a safe industry.»

The association added that widening the price gap between black-market products and legal ones would only make the illicit market more attractive to consumers. Illegal and adulterated THC vaping products have also caused an outbreak of lung disease which caused numerous deaths and injuries in the United States.

The CCIA urges the government to reconsider its decision and to work more closely with the industry to develop policies that allow the legal market to survive under difficult market conditions while protecting consumer health.