California Sen. Scott Wiener has introduced legislation to help the state’s struggling cannabis industry, which has been burdened by high taxes that have resulted in commercial prices that cannot compete with the state’s still-thriving illicit market.
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Senate Bill 1336 establishes a carryforward tax credit for licensed cannabis dispensaries equal to the amount of the following business expenses, according to an announcement from Wiener’s office:
- Employment compensation,
- Safety-related equipment and services, and
- Employee workforce development and safety training
Sponsored by the United Food and Commercial Workers (UFCW) Western States Council, S.B. 1336 “recognizes the difficulties that commercial cannabis retailers face, and provides a hand to a unique and important part of California’s economy,” according to Wiener’s announcement.
"UFCW members were the leading force behind the push for Proposition 64 in 2016 because we knew that a legal cannabis industry in California would provide workers with high road jobs that provided living wages, good benefits and an opportunity to save for their future," Amber Baur, executive director for the UFCW Western States Council, said in a public statement. “S.B. 1336 aligns with that long-held vision by ensuring legal cannabis employers invest in their workers and provide safety for consumers and communities. We are proud to sponsor S.B. 1336 because we know California can continue to lead the nation's cannabis industry into the future and support struggling businesses.”
Prop. 64, the measure that California’s voters approved in 2016 to legalize adult-use cannabis, levied a cultivation tax and an excise tax on the state's commercial cannabis market. The taxes have generated $1.75 billion in revenue for the state between January 2018, when commercial adult-use sales launched, and August 2021, according to the announcement. The taxes have also increased the prices of legal cannabis products, while products on the illicit market carry much lower price tags.
It is estimated that California’s illicit cannabis market generates $8 billion in annual sales, while the state’s legal cannabis market brings in about half that amount.
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“Without a tax credit for those selling legally, many commercial businesses providing safe and regulated products may not be able to meet their bottom line,” Wiener’s announcement reads. “This existential crisis for the legal industry will directly affect equitable access, especially for medicinal users who rely on safe and regulated cannabis products.”
Cannabis businesses remain ineligible for federal tax deductions and credits associated with their normal overhead expenses due to federal prohibition.
“Our legal cannabis businesses are facing hard times, and it’s time we stepped up to support them,” Wiener said in a public statement. “By ensuring their success, we can keep employees working for fair wages in good conditions, we can stop illegal and illicit sales from dominating the market, and most importantly, we can keep cannabis access equitable for all Californians.”
This is not the first time Wiener has come to the cannabis industry’s aid; earlier this month, he introduced separate legislation that would require all cities and counties to provide consumers access to medical cannabis, either through brick-and-mortar dispensaries, licensed deliveries, or both.
The bill aims to prevent Prop. 215, California’s medical cannabis law, from being undermined by local jurisdictions that have banned both dispensaries and delivery services from operating within their borders.
Additional tax policy reform has been proposed by Sen. Mike McGuire, who has introduced a bill that would end California’s flat-rate cannabis cultivation tax, and Sonoma County, which has approved a measure to slash local cannabis farmers’ taxes by 45%.
