State tax revenues on sales of recreational marijuana falling far short of projections

At West Coast Cannabis in Cathedral City, the company’s CEO says sales have “exceed expectations” since recreational sales became legal in California January 1st, despite the fact that about a third of the total purchase price on what they sell is taxes.

“Taxes is part of the deal that we made when it comes to cannabis legalization, so we do, I believe, have a little bit of a need to contribute toward that tax revenue,” said CEO Kenny Churchill.

Churchill, whose company operates another marijuana store in Palm Desert, and soon to add a second in that city, is well aware of the tax revenue shortfall in Sacramento.

He doesn’t think tax rates on the pot are hampering legal sales.

He thinks projections are not being met because not enough California cities are issuing retail licenses, and in some cases, those that are, “are not approving enough”.

“If you don’t allow the regulated market to exist, it’s going to be very difficult for people to spend their money in that regulated market,” said Churchill.

Unlike most California cities, the entrepreneur thinks Cathedral City has struck the right balance when issuing what he calls an “appropriate” number of sales licenses, now at 13, to effectively reap tax benefits, which he estimates at roughly “one million dollars” so far.

According to some estimates, upwards of 80 percent of marijuana sales are “under the table”, undercutting profits to licensed operations, and reducing tax revenues for cities and the state.

Down the street, at Cathedral City Care Collective, a manager we spoke with off camera says he does believe what he calls “high taxes” are causing some buyers to purchase from unlicensed dealers, especially those with low incomes, including seniors and veterans.

But, one customer we spoke with does not mind the taxes, because of the level of service, not available on the street.

“I’m doing it legally. I’m not going to be arrested,” said Mike Wiegenstein.