Marijuana Taxes in California a Major Disappointment
California’s legal marijuana market is off to a slow start and off of the governments tax targets.
Marijuana cultivation and excise tax collections hit $48-M in Q-2, state officials announced Wednesday. That is up from Q-1 but well below the windfall envisioned by the state.
Finance officials had estimated California would bank $185-M from excise and cultivation taxes in 1-H from broad legal sales, which kicked off on 1 January.
But collections YTD hit only $82-M.
“After 6 months of legal cannabis sales there is a staggering … gap between today’s tax revenue numbers and what voters were promised,” said state Assemblyman Evan Low, a Democrat from Campbell who heads the Business and Professions Committee. “Regulators must adapt before California’s lawful cannabis businesses are obliterated by the black market.”
The slower than expected flow of cash underscores the choppy roll-out of the nation’s largest legal market.
Illicit sales continue to flourish
Off legal market sales lure consumers away from legal shops, and many areas have banned commercial marijuana activity, limiting the number of places adults can buy legal the drug. Businesses say hefty tax rates that can approach 50% in some areas are also driving business underground.
“The situation is pretty severe,” said the executive director of the California Growers Association, an advocacy group for farmers and businesses.
Californians are buying plenty of marijuana they are just not buying it from licensed shops.
Most of the state does not have access to it. The California marketplace needs significant change if it’s going to function … primarily at the local level.
Tuesday, state regulators meeting in Los Angeles heard a long list of complaints and concerns about California’s marijuana economy, once estimated to grow to $7-B.
The complaints include: an unreliable supply chain, a shortage of licenses, testing problems and a contested proposal to allow home marijuana deliveries in cities that have banned sales.
The state’s top marijuana regulator, said after the hearing that the state remains in a challenging transition period as it attempts to transform what was once a largely illegal market into a multibillion-dollar, regulated economy.
“Unfortunately, there is confusion out there,” she said.
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