Change Ahead in California?

Departments - From the Editor

June 2, 2022

In late May, the Los Angeles Times Editorial Board addressed the ongoing challenges for licensed cannabis cultivators operating in California’s legal market that have been compounding for years, arguing for more broad reform beyond taxes.

The board of one of the largest newspapers in the country wrote that reducing state taxes—especially the $10.08 per dry-weight ounce of cannabis flower and $3 per dry-weight ounce of cannabis leaves cultivators pay—is an important start. But it’s not enough, the board noted, detailing myriad other hurdles cannabis companies must navigate.

Managing Editor Patrick Williams and Senior Editor Zach Mentz outline these vast and nuanced complications plaguing both growers and retailers in by far the biggest state market in the country in this month’s cover feature. Taxes are a big focus and an area where easing this burden seems possible and could have a trickle-down effect. In this comprehensive article, cultivation company and dispensary business owners and government officials note how both the state cultivation tax and 15% excise tax have essentially buoyed the still-dominant illicit market while leaving licensed players out to sea.

While there are various efforts at the state level to provide relief, one of the most significant being a bill that eliminates the cultivation tax and reduces the excise tax to 5%, there are still taxes and policies that make doing business more difficult at the local level. Individual jurisdictions have a lot of power, and changing established policies can take time.

Leaders in Sonoma County unanimously approved a 45% tax cut for cultivators, who are taxed based on the square footage of their growing canopies, but will reassess and implement a new system by July 1, 2023, according to a county press release. Officials on the Board of Supervisors in Santa Barbara County are sticking with the current tax system, noting it would be complicated to amend it and would require approval from voters, according to the Santa Ynez Valley News.

“The more you look at this, the harder it is to figure out something that works all the way around—for the county, the residents and the growers,” 5th District Supervisor Steve Lavagnino said, according to the news outlet. These disparate local policies can complicate an already arduous state environment.

The Cannabis Business Times team has been following the California story for a long time, reaching out regularly to leaders in all segments of the industry to check in and share updates from their perspective, and we’ll continue to watch and report the latest developments in the state. (Be sure to check for new articles and read past coverage here.)

In addition, ahead of Cannabis Business Times’ Cannabis Conference, Aug. 23-25, CBT is hosting a virtual conversation at 1 p.m. EDT, July 26, 2022, to discuss the implications of the challenges in California’s cannabis industry. Swami Select owner Swami Chaitanya, Claudio Miranda of Guild Enterprises, and award-winning marketing professional Angela Pih will dig into taxes, the illicit market, price compression, and other topics, and the opportunities that exist despite these realities.