California Sen. Mike McGuire may soon introduce a bill that would do away with the state’s cultivation tax, according to the North Bay Business Journal.
On Dec. 8, McGuire said he plans to introduce legislation in early 2022 to eliminate the tax.
California State Senate
“The bottom line is this: Cultivation taxes are crushing small farmers throughout the North Coast,” McGuire said, according to the paper. “Basing it off the weight doesn’t account for when the market collapses. It’s simply not sustainable.” (The state taxes cultivators per an ounce-weight basis.)
This comes on the heels of a recent vote by the board of supervisors for the city and county of San Francisco to suspend the local cannabis business tax through the end of next year. Market observers and trade associations have noted cash flow issues throughout the entire state as illicit operators rake in billions more compared to the regulated industry.
In 2019, according to Statista, California’s legal cannabis industry was valued at $3.1 billion, while its illegal market was valued at $8.7 billion.
A higher excise tax for point-of-sale transactions could replace the state cultivation tax, McGuire said, per the North Bay Business Journal.
California residents will need to vote on a permanent tax reduction, McGuire said, as the state tax is included in Proposition 64.
Lindsay Robinson, executive director of the California Cannabis Industry Association, told the news outlet that the organization is seeking full-on tax reform and more dispensaries.
“This is not just one rallying cry,” Robinson said. “The industry is at its breaking point of a potential collapse.”
Joe Rogoway, an attorney, said cultivation shouldn’t be taxed in the state at all, per the paper. “Until we lower the tax liability, the illicit market will continue to flourish,” said Rogoway, who has worked with the Cannabis Business Association of Sonoma County and Sonoma Valley Cannabis Enthusiasts, and drafted resolutions for review by the Sonoma County Board of Supervisors.
Some government officials in Sonoma County said they would either eliminate cannabis taxes or reconsider their approach, according to the North Bay Business Journal.
On the retail side, an October POLITICO report found that California had only 2.1 dispensaries per 100,000 residents. The news outlet compared the figure to other states in the western U.S. with higher ratios: 2.8 in Nevada, 6.6 in Washington, 14.2 in Colorado, 17.9 in Oregon, and 20.3 in Alaska.