California has announced that taxes on the legal cannabis industry will increase after the New Year. Despite numerous calls from the industry. which is already struggling to fight a black market that still represents twice the legal market and $8.7 billion per year.
In a special note from the California Department of Taxation and Tax Administration, the state announced several increases:
- taxes on cannabis cultivation would be increased by more than 4%, an adjustment to take account of inflation
- the tax on one ounce (28g) of dried cannabis flowers will increase from $9.25 to $9.65, a 4.3% increase.
- Tax on dry cannabis herb will increase from $2.75 to $2.87, which also represents an increase of 4.3%.
- the tax on an ounce of undried whole-plant cannabis will increase from $1.29 to $1.35, a 4.6% increase.
The note also reveals an increase in the State mark-up rate on cannabis from 60% to 80%. So,regulators required to recalculate this margin every 6 months, based on California market data.
California industry dissatisfied
Consequently,in a statement, the California Cannabis Industry Association (CCIA) expressed its anger at the decision.
“As the California regulated market is about to collapse as a result of taxes on cannabis users, local bans, onerous regulations, slow growth, and a thriving illicit market, we believe that CDTFA’s decision to increase the tax burden on legal cannabis operators runs counter to the development of a safe industry”
In addition,the association added that widening the price gap between the black market and legal products would only make the illegal market more attractive to consumers. Illicit and adulterated THC vaporizing products have also caused an epidemic of lung disease that has caused many deaths and injuries in the US.
The CCIA urges the State to reconsider its decision and work more closely with the sector . To formulate policies that allow both the legal market to survive in difficult market conditions while preserving the health of consumers.