California cannabis taxes to increase by 80%

Plans are in place to increase the California cannabis tax by 80%. However, a group of legal cannabis businessmen, who preferred to remain anonymous for fear of reprisals, argued that this measure could be considered as a tax maneuver on the part of the government, which will only benefit the sales of illegal retailers.

You can find more information about the cannabis industry and other important news in the cannabis sector in the Hemp.im app. This app collects the latest marijuana news among cannabis sectors that investors operate in.

Changes to the California cannabis tax mean trouble for the legal market

The California cannabis tax hike is considered a hard blow to the established local market, which boasts the largest in the world.

It should be noted that legal sales increased significantly compared to 2018, as the revenues reached $2.5 billion, despite the fact that the business is in recession, due to the uncertainty in cannabis legalization worldwide.

According to specialists, the benefit to the black market is that it can offer significantly lower prices than legal companies, so it is considered that many consumers will opt for the illicit industry to buy cannabis if prices increase.

California cannabis tax hike may send consumers back to the black market

It should be noted that, over the past four years, there has been a significant trend in the increase in legal cannabis prices in the United States.

If the new taxes are not absorbed by the companies and instead are charged to consumers, entrepreneurs warn that illegal sales of cannabis will increase.

Entrepreneurs, therefore, allude that this measure hinders the ability of the legal cannabis industry to operate profitably since it is deliberately trying to crush the livelihoods of legal operators.

“The illegal market is competitive because legal cannabis is very expensive to produce under Proposition 64,” said Dale Gieringer, director of the organization “Cal NORML.”

Assemblyman, Rob Bonta, argued that the black market continues to undermine the authorized and regulated market because state-level cannabis tax revenues are much lower than expected, indicating that a significant number of illegal, untaxed cannabis companies are still operating.

The black market continues to grow in California

According to data published in the Los Angeles Times, the black market continues to prosper. The profits are expected to exceed $8.7 billion.

“The reason the black market still exists is that California cannabis taxes are too high. Raising taxes will only exacerbate the situation by continuing to keep black market store prices ridiculously lower than legal dispensaries carrying proven products,” said Jay Handal, co-owner of Erba Markets.

“I am afraid that this increase will only strengthen the illicit market since the regulated market is already expensive. We are in the process of moving our business out of California because it simply doesn’t make financial sense for us to operate here, no matter how much we want to. I hope the many California cannabis companies I support and admire will pay close attention to how this increase affects their operating expenses and make the necessary adjustments to stay in business,” said Leone Posod, CEO of Treat Yourself, a CBD skincare company.

In response, the CDFTA stated that among its responsibilities it has to analyze the rate of increase in cannabis taxes every six months based on an analysis of state-level market data to determine the average surcharge rate between the wholesale cost and retail selling price of cannabis and cannabis products.

Cannabis prices in California predicted to rise

Based on these estimates, the average market price is established, which is the gross income of the seller from the retail sale of cannabis or cannabis products. Therefore, the new tax rate is expected to require an increase of about 80% effective as of Jan. 1, 2020.

Thus, the cannabis flower tax per ounce will increase from $9.25 to $9.65, cannabis leaves tax per dry weight will increase from $2.75 to $2.97, and fresh cannabis plants tax per ounce will increase from $1.29 to $1.35.

__

(Featured image by Snapwire via Pexels)

DISCLAIMER: This article was written by a third party contributor and does not reflect the opinion of Hemp.im, its management, staff or its associates. Please review our disclaimer for more information.

This article may include forward-looking statements. These forward-looking statements generally are identified by the words “believe,” “project,” “estimate,” “become,” “plan,” “will,” and similar expressions. These forward-looking statements involve known and unknown risks as well as uncertainties, including those discussed in the following cautionary statements and elsewhere in this article and on this site. Although the Company may believe that its expectations are based on reasonable assumptions, the actual results that the Company may achieve may differ materially from any forward-looking statements, which reflect the opinions of the management of the Company only as of the date hereof. Additionally, please make sure to read these important disclosures.

First published in NacionCannabis, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.

Although we made reasonable efforts to provide accurate translations, some parts may be incorrect. Hemp.im assumes no responsibility for errors, omissions or ambiguities in the translations provided on this website. Any person or entity relying on translated content does so at their own risk. Hemp.im is not responsible for losses caused by such reliance on the accuracy or reliability of translated information. If you wish to report an error or inaccuracy in the translation, we encourage you to contact us.