In November, California officials announced that taxes for cannabis excise and cultivation will increase next year. The excise tax will increase from 60% to 80% on New Year’s Day, while cultivation taxes will increase by up to 4.6%. The news has many in the cannabis industry worried about how business owners will survive in the state’s legal cannabis market.
Multiple cannabis companies and trade organizations sent representatives to voice concerns about growing tax burdens with staffers in Gov. Gavin Newsom’s office, the California Department of Tax and Fee Administration (CDTFA), and multiple state legislators.
Some of the proposals from industry representatives included:
- Alternative legislative measures to simplify cannabis taxes
- Asking Gov. Newsom to order the CDTFA to cancel the tax hike
- Asking the CDTFA to postpone the tax increase
Although a spokesperson for Gov. Newsom tweeted that he is “sympathetic to the challenges faced by legal cannabis operators” and wants to work with stakeholders, industry insiders can’t agree on whether the governor has the authority to order a halt to the tax hike or if using the Legislature to enact change is the best option.
According to Caity Maple, vice president of government affairs for Perfect Union, “The governor has the authority to go in and say … ‘We’ve decided as a state that we’re either going to postpone this or for now cancel this.’”
However, Newsom’s spokesperson claims that the laws established by both Proposition 64 and Senate Bill 94 eliminates this option for the governor.
When it comes to a legislative fix for the tax hike, it would likely take up to nine months to move a tax bill. In that time, cannabis companies still risk losing money, laying off employees, and going out of business.
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