Cannabis Tax Revenues — Will they Continue to Grow?
As the cannabis industry continues to gain traction, its tax revenues are higher than ever. Here’s a breakdown of the numbers and what they mean for the industry:
The Current Numbers
The numbers California Department of Tax and Feed Administration gave in their 3rd quarter report on cannabis tax revenues back in November 2020 were .
California reported $159.8 million in revenue for cannabis excise tax and $41 million in cultivation tax. In addition, there was $105.9 million in sales tax for cannabis businesses. Those are some intense numbers to wrap your brain around.
The Past and The Future
This number has been steadily growing. Only a few years back in November 2016, California voters helped to pass Proposition 64 (also known as the Control, Regulate, and Tax Adult Use of Marijuana Act).
Two new cannabis taxes (one targeting the cultivation and harvest for cannabis intended for commercial market, and one focusing purchasers of cannabis and cannabis-derived products) went into effect in January 2018. (That’s in addition to the typical retail sales tax on the state and local level.)
All in all, since the start of 2018, we’ve seen a total program revenue of nearly $2 billion dollars.
And they’ll continue going up. Beginning on January 1, 2020, the CDTFA is now required to annually adjust the cultivation tax rates for inflation.
The Pros and Cons
But let’s unpack those numbers.
California makes up about a third of the nation’s entire cannabis tax revenue and one of the most brutal of these taxes is the local cannabis excise tax on business owners (on top of the typical retail sales tax on the state and local level).
Though in some places, the tax is nonexistent, other cities raise it all the way to 15%. For example, Oakland is at 10%, while 20 miles away in San Francisco has no local cannabis excise tax. This can put some business owners at a disadvantage.
On the flip side, the Legislative Analyst’s Office also says that California’s cannabis taxes rank are middling among states who have legalized the plant and as of the end of 2020, sales in the state continue to hit all-time highs. It is also anticipated that in the future, California and other states that tax based on the weight of their cannabis will fare better than states (like Washington or Colorado) that base their tax off of price.
They also say that taxes go to good causes, 60% aiding youth anti-drug programs, 20% helping the environment, and the last 20% supporting public safety grants. That means it’s being spent on everything from wildland restoration to at-risk youth.
…What do you think of our cannabis tax laws as they stand? Are you for or against the current rates?
