The California cannabis market is beginning to mature. As the most populous state in the US, California has earned over $1 billion in cannabis tax revenue over the past 2 years. In fact, California earned $629 million in 2019 alone—accounting for a third of the total cannabis tax revenue collected in the US.
But as demand and industry growth stabilizes, cannabis entrepreneurs are calling for sweeping changes to legislation, particularly for cannabis tax reform.
High taxes aren’t just plaguing California. In January of 2020, Illinois earned $10.5 million in tax revenue from cannabis. The state earned this by:
Charging a 7% tax to cultivators on sold goods.
Charging 10% on flower with 35% or less THC content.
Charging 20% on edibles and extracts.
Charging 25% on flower with more than 35% THC.
25% or 30% tax rates aren’t unheard-of in the cannabis industry. Unfortunately, because of these high tax rates, cannabis businesses have to increase their prices, which severely limits their opportunity for growth.
In fact, Californians are turning to the black market for cheaper prices. Rough estimates say illicit cannabis still makes up 75% of all cannabis sales. That makes sense on the consumer’s side, though, since dispensaries are often 30% - 80% more expensive than the black market.
If you add layoffs, stagnating revenues, and banking problems to the mix, we can easily see how California’s cannabis is having trouble staying profitable. But because of this pricing problem, the California government is missing out on additional tax revenue.
As a result, California is currently mulling over a tax relief plan for the cannabis industry. In the current legislative agenda, several bills are up for consideration intended to offer tax relief to cannabis businesses. These bills include provisions like:
Merging the 3 state agencies overseeing cannabis into one.
Reducing the effective tax rate from 15% to 11%. This would be temporary and last until 2023.
Exempting medical cannabis from several taxes, like sales tax.
Tax revenue is still trending upward in adult-use markets. However, to scale cannabis successfully, state governments have to enact responsible tax policies that allow the industry to breathe.
Massachusetts legalized adult-use cannabis in 2016, with storefronts opening in 2019. While the East Coast mulls a legalization domino-effect, Massachusetts
The US currently has over 1500 cases of coronavirus, with 40 deaths. With coronavirus reaching pandemic status, there’s naturally a concern from a public
Although cannabis legalization is steadily spreading throughout the US, sovereign tribes can choose to embrace cannabis separately from the state they live in.
CBD is a thriving product in the cannabis industry: it’s worth more than $4.6 billion worldwide. CBD products are popular for consumers who want the benefits
The COVID-19 pandemic has nearly every business across the US reeling. Fortunately, the cannabis industry is adjusting well to edicts on self-isolation
While much of the struggle for adult-use cannabis centers on US policy, we often forget that international policy shapes the conversation, as well. Most of our
