Licensed cannabis businesses in California have been left “stunned and outraged” by the state’s decision to increase tax rates on the marijuana industry.
The California Department of Tax and Fee Administration announced that the cannabis mark-up rate and cultivation tax would go up from Jan. 1, 2020. The Department said it used an analysis of state-wide market data to determine the average mark-up rate between wholesale cost and retail selling price, which will now be set at 80%.
It reported that the cultivation tax rate would increase as “an adjustment for inflation”. The adjusted rates will be reflected on all monthly and quarterly cannabis tax returns from the beginning of 2020.
It means that tax on an ounce of dried cannabis flower will increase from $9.25 to $9.65 from Jan. 1, while an ounce of leaves will be taxed at $2.87 instead of $2.75.
The tax rate on a fresh cannabis plant will go up from $1.29 to $1.35 per ounce.
In a statement emailed to the press, the California Cannabis Industry Association expressed fury at the decision. “As California’s regulated market spirals towards collapse from taxes on cannabis consumers, local bans, onerous regulations, slow growth, and a thriving illicit market, we believe that the CDTFA’s decision to increase tax burdens on compliant cannabis operators is counter to developing a safe industry,” it said.
It added that widening the price gap between black market and legal marijuana products would simply make the illicit market more attractive for consumers. Illicit THC vaping products are blamed for a lung illness outbreak that has led to many deaths and injuries across the U.S., and licensed cultivators in California say it is irresponsible to push cannabis users to the black market.
It urged the state to reconsider the decision and work closer with the industry on formulating policies that help the regulated market survive in tough trading conditions, while safeguarding consumer health.
It was recently reported that illegal cannabis sales continue to outpace the legal market in the Golden State.
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