California’s adult-use cannabis retail market is on track to shrink for the first time since the state launched commercial sales in 2018.
State-licensed dispensaries reported $1.27 billion in taxable adult-use sales for the third quarter 2022—a nine-quarter low going back to the second quarter of 2020—according to data released Nov. 18 from the California Department of Tax and Fee Administration (CDTFA).
Editor’s note: The “taxable sales” figures include sales of cannabis, cannabis products, and other retail sales of tangible personal property reported on sales and use tax returns.
Through the third quarter of this year, California retailers have reported just more than $4 billion in adult-use taxable sales, representing a 7.5% decrease compared to the first three quarters of 2021. However, taxable sales figures provided by CDTFA are fluid and subject to change based on amended and late returns and other tax return adjustments.
For instance, when CDTFA officials first reported full 2021 figures, taxable sales tallied $5.2 billion for the year. Since then, CDTFA officials have adjusted 2021 figures to reflect nearly $5.8 billion in taxable sales—more than $568,000 in sales that weren’t previously reported.
Also for the third quarter 2022, adult-use sales generated roughly $242 million in taxes, including $128.4 million in excise tax and $113.6 million in sales tax. California’s total tax revenue has now declined for five consecutive quarters, but the most recent quarter represents the first time the state’s cultivation tax rang in at $0 following legislation that terminated the $161-per-pound rate previously imposed on licensed growers.
The total reported cannabis tax revenues do not include outstanding returns, nor do they include locally imposed taxes collected by cities and counties, according to CDTFA.
Through the third quarter, adult-use sales have provided nearly $853 million in state revenue in 2022, representing a 17.2% decrease compared to the first three quarters of last year.
Based on current data available, California’s adult-use retailers have sold nearly $19.3 billion in cannabis and products since launching commercial sales in 2018. The state’s total adult-use cannabis tax revenue to date is $4.4 billion, including $2.2 billion in cannabis excise tax, $1.7 billion in sales tax and $500 million in cultivation tax, which was eliminated July 1, 2022, according to CDTFA