Cannabis sales figures are creeping up, and total taxes continue to dive in California.
That’s the big takeaway from the state’s cannabis tax revenues report for the second quarter of 2022, based on data updated Aug. 29 from the California Department of Tax and Fee Administration (CDTFA).
California’s taxable sales for adult-use cannabis eclipsed $1.2 billion in Q2, representing a 2.9% increase from the previous quarter. Meanwhile, the nearly $280 million in total taxes collected by the state in Q2 represents a 6.5% decrease from the previous quarter’s tax collection.
But does coupling sales increases with tax decreases mean struggling California cannabis operators who have been up against encroaching market obstacles are now headed toward greener pastures in one of the most overtaxed state markets in the U.S.?
The full picture has yet to play out amidst a host of regulatory changes under the barely 1-year-old Department of Cannabis Control, a continuous effort to license more retailers, and the zeroing out of the cultivation tax while shifting the excise tax collection to retail.
In the final quarter for the state’s cultivation tax, California collected $26.4 million (a 10-quarter low) from the $161-per-pound rate imposed on licensed growers in Q2, according to CDTFA. That tax, which has provided the state roughly $500 million in revenue since adult-use sales commenced in January 2018, was effectively eliminated on July 1, 2022, thanks to the passage of Assembly Bill 195.
Among the measures included in A.B. 195, the bill also maintains a 15% cannabis excise tax but moves the collection of that excise tax from distributors to point of retail sale by Jan. 1, 2023.
In Q2 2022, California’s cannabis excise tax provided nearly $144 million in state revenue, representing a 7% decrease from the previous quarter and a 20% decrease compared to Q2 2021. The state’s cannabis excise tax has experienced four straight quarters of decline.
In addition, California’s total tax from cannabis—which includes the cultivation, excise and statewide general sales tax rate of 7.25%—has also experienced four straight quarters of decline with a 20% decrease compared to Q2 2021.
Since the January 2018 commercial retail launch, California has recorded more than $16.8 billion in adult-use cannabis sales. The state has also collected more than $4 billion in total tax from cannabis, according to CDTFA.