Person buying cannabis at a cannabis dispensary

California’s Potential Cannabis Tax Reform

Could 2022 be a make-or-break year for the California cannabis industry? Many cannabis business owners believe so after asking government leaders to reconsider the amount of taxes the industry faces, especially with the continued increase of operating and regulatory costs.

As of January 1, 2022, cannabis was taxed at a flat rate — more than $160 per pound. This was on top of 15% excise tax, local cultivation, processing, manufacturing, distribution, and retail taxes.

It was estimated that the Golden State made nearly $1 billion in tax revenue from cannabis in the first three quarters of 2021 alone.

While the state is raking in millions of dollars, some business owners are struggling to make ends meet. That’s why some state officials have taken action by proposing a potential tax reform.

In February 2022, two lawmakers spoke about their plan to crack down on illegal cannabis businesses.

“We definitely have to take action so that the cannabis industry thrives and really benefits all workers and organizations,” Assemblywoman Blanca Rubio, D-Baldwin Park, told one news outlet.

California Governor Gavin Newsom has reportedly shared support to help cannabis businesses when he unveiled his budget in January, but his administrators say it’s unlikely that immediate changes will be put in place.

“It is an oversimplification to say that tax reduction will solve all of the industry’s problems,” Nicole Elliott, director of Newsom’s Department of Cannabis Control told a journalist with the nonpartisan, nonprofit organization CalMatters.

Let Us Help Keep Your Cannabis Business Open

Business matters — no matter the industry — can be complicated. When operating a cannabis business, though, because rules and regulations are constantly changing, it can be challenging to ensure you meet the state’s needs.

Let the team at Purdy & Bailey, LLP work with you to help keep your business open. Our experienced attorneys can provide preventative legal services as well as come up with strategies if you are concerned you may have to shut down.

Our team is available 24/7 to answer your questions — contact us today online or by phone. (858) 360-7080

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