Tax Bill Would Offer Relief to Cannabis Businesses and Consumers

For many years now, attorneys with the Cannabis Law Group in California have been working with medical marijuana operations obtain compliance with the law. More recently, we’ve been on the forefront of helping recreational marijuana businesses align their operations with the regulatory parameters set forth in Proposition 64 Jan. 1, as well as those guidelines established by local governments.

However, the level of success a business owner can achieve requires help from all levels, including government officials setting regulations and tax rates. Many owners face a broad range of challenges when transitioning from medical to recreational sales or opening a business for the first time under the new adult-use standards.

Rob Bonta (D-Oakland) and Tom Lackey (R-Palmdale) want to ease some of those pains. They have introduced Assemblybill 3157, which would reduce the state marijuana excise tax to 11 percent for three years. The tax currently sits at 15 percent. The bill states: “The cumulative tax rate imposed by existing law is substantial and undermines the legal regulatory system if high taxes cause prices to far exceed that what is found on the black market.”

According to Leafly, Lackey said he hopes this bill will give relief to legal cannabis businesses, who currently have a lot of competition from black market sellers. Legislators also hope this will help make it easier for businesses to transition into legal sales and get on their feet.

The bill also suspends the cannabis cultivation tax, easing added expenses that occur along the marijuana production chain.

A breakdown of current cannabis taxes shows they create an unusually high burden (one of the highest in the country). When all of the state taxes are added up, it comes to about 25 percent. And this doesn’t include extra taxes imposed by local governments, though some cities are also considering their own tax decreases to do their part in supporting business owners.

Our skilled Los Angeles cannabis business lawyers know the bill, if passed, would be a victory for business owners and consumers alike. The burden of these taxes is often passed along the customers in the price of the final product. Experts say these few small changes will potentially drop consumer prices by 9 percent, making it closer in price to black market sources. This increases the incentive for customers to choose a legal retailer, which in turn helps out local legal business owners. And more sales also means more taxes going into city and state coffers to make up for the decreased tax rates. Lackey told Leafly that Washington actually saw a significant bump in tax revenue after simplifying the tax structure. It’s a cycle of success, but it must begin with government action.

Our experienced attorneys know there are always growing pains when new major legislation is released to the public. We stand beside marijuana business entrepreneurs as they get their start and help them understand the best course of action to move forward while following the law. We are keenly positioned to help navigate these challenges and keep our clients in compliance. We are thrilled to see legislators joining us in standing up for these hard-working Californians and hope to see more action designed to assist already legal owners and create incentives for more companies to join a thriving and robust marketplace.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, collectives, patients, defendants, workers and those facing criminal marijuana charges. Call us at 949-375-4734.

Additional Resources:

California Bill Would Temporarily Cut State Cannabis Taxes, March 15, 2018, Leafly

More Blog Entries:

Warning Letters Sent to Unlicensed Cannabis Businesses in California, Feb. 18, 2018, Cannabis Law Group