Legal California cannabis industry says growers tax too high to survive illicit competition

Those in California's legal cannabis industry are expressing mixed reactions to a newly cut cultivation tax on cannabis growers. The change also relocates a 15% excise tax from distributors to retailers.

Governor Gavin Newsom signed Assembly Bill 195 into law on June 30 as part of a $308 billion budget.

California’s weight-based cannabis cultivation tax was eliminated—effective July 1, 2022.

The law eliminated the the cultivation tax, which carried a $161-per-pound charge for licensed growers.

For years, those in the legal cannabis industry have been advocating for less taxation and more support to spur retail in order to stay competitive with the illicit market.

At the beginning of the year, Governor Newsom's proposed state budget included millions of dollars for the cannabis industry.

During a press conference on January 10, Newsom said lawmakers were "projecting about $787 million of revenue in '22-'23. Now that assumes existing tax rates."

"It is my goal to look at tax policy to stabilize market. At the same time it's also my goal to get these municipalities to wake up to the opportunities to get rid of the illegal market and provide support and a regulatory framework for the legal market," Newsom said.

However, the legislation recently signed by Newsom is facing criticism by some in the legal cannabis industry who argue it doesn't go far enough to offer the support they need to stay afloat.

Assemblymember Eduardo Garcia, D-Coachella, weighed in on the cultivation tax cut. In a statement to News Channel 3 he said:

"This is a step in the right direction, but more can and should be done to ensure responsible stability for this industry. Further policy efforts are needed to establish a safe and sustainable foundation for these California businesses -- importantly, an equitable framework that also supports community opportunities."