Deep Dive: California Cannabis Tax Relief
Image: @Reason
California is the epicenter of cannabis, but it's own recreational market has been plagued by numerous issues.
Last week, Governor Gavin Newsome signed a bill providing some tax relief to the industry as a whole. Here are three points of emphasiss from the news.
1: Why Tax Relief Is Important
The tax structure for California Cannabis has long been under scrutiny, as it has caused extra financial burden for licensed producers and retailers in the state.
This extra financial burden has been magnified by two forces in recent years. First, robust black-market competition has cannabalized recreational cannabis sales in the state. Second, cratering flower prices have thinned profit margins for licensed producers and retailers.
The combination of those forces has led to what many have called a crisis in the state, and has spurred an official letter to the governor from multiple major licensed companies in the state.
2: What the Tax Relief Looks Like. The signed bill takes two major actions. First, it eliminates the cultivation tax. From Forbes: Under AB-195, California’s cultivation tax of more than $161 per pound of cannabis flower will be eliminated completely. The bill, which marks a significant change to California’s tax structure for the legal marijuana industry, Second, it locks in the excise tax rate at 15% for the next three years. This will allow cannabis producers to have three years of true relief, and also reverses earlier proposals to raise the excise tax. 3: Labor Organization and Social Equity
The Bill also includes provisions to provide tax credits for Social Equity businesses, and transfers responsibility for collecting the cannabis excise tax from distributors to retailers.
Finally, the bill could the threshold for companies to unionize. From Forbes:
Additionally, AB-195 lowers to 10 the number of workers a business can employ before triggering requirements to create a labor peace agreement, which can lead to unionization by the company’s employees.
---
Overall, this is a great achievement for the licensed California Cannabis market. Lower tax burdens should lead to more favorable pricing for customers as well as incresed profit margins for licensed producers. It will be telling to see how this change affects the state's marketplace in the coming years, and could prove as a blueprint for other states looking to stabilize their own cannabis industries.
Read More:
