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Cannabis Industry Looks to Governor Newsom for COVID-19 Relief

In March, California Governor Gavin Newsom included the cannabis industry in the list of essential businesses that can remain open during the COVID-19 shutdown. Yet cannabis businesses throughout the state are still struggling with recently increased tax rates.

Despite the staggering amount they pay in taxes, these businesses have no access to the emergency financial relief in the CARES Act. If they raise the prices of their products, they risk losing customers who can simply turn to illegal and unlicensed vendors for more affordable cannabis. While the government is staunchly opposed to this illegal market, failing to help licensed vendors only strengthens that market.

In response to this financial crisis, many are turning to the state government for support. Recently, a coalition came together to ask Governor Newsom for temporary tax relief for the legal cannabis industry in California.

This coalition included the following groups:

  • Southern California Coalition
  • California State Conference of the NAACP
  • Los Angeles Metropolitan Churches
  • Americans for Safe Access
  • Black Women’s Cannabis Council
  • California Minority Alliance
  • National Diversity and Inclusion Cannabis Alliance

The letter pointed out the lack of relief from the CARES Act for cannabis businesses, cited the tax hike in January, and addressed the threat of the illegal market, unfettered by state or federal taxes. Additionally, the letter emphasized the disproportionate impact of COVID-19 on communities of color, as well as the suffering of these communities due to the perpetual war on drugs. According to the letter, many cannabis businesses are run and supported by people of color, and they employ those in marginalized communities.

What Relief Is Available?

Fortunately, cannabis businesses may benefit from state-ordered tax relief, deferrals, and extended deadlines.

Although they cannot obtain forgivable loans from the Payroll Protection Program, they do have access to forms of relief such as:

  • Suspended and forgiven tax interests/penalties
  • 60-day extension to request tax appeals, file refund claims, and more
  • Delayed tax payment deadline to July 31st for amounts under $1 million
  • A 12-month sales and use tax deferral for businesses under $5 million in yearly taxable sales (up to $50,000)

If these relief options are not enough to keep a cannabis business afloat, the next step may be to examine business interruption insurance. They can also evaluate their business contracts to determine whether a force majeure clause could allow them to temporarily suspend or adjust business operations without becoming liable for nonperformance.

Bring Your Legal & Financial Concerns to Purdy & Bailey, LLP

If your cannabis business has been financially impacted by the coronavirus, our team at Purdy & Bailey, LLP can help you assess your options. This industry is subject to increased taxes and compliance costs, and we can work to minimize your liabilities and protect your rights as a California business owner.

Call (858) 360-7080 or contact us online to set up a courtesy evaluation. We are ready to put our 50+ years of combined legal experience to work for you.

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