Newly-elected California Gov. Gavin Newsom’s state budget shows that by the end of June the state expects to collect just $355 million in cannabis taxes, about half of what was previously projected, according to a MarketWatch report.
Experts say that the reality is a majority of California cannabis consumers still purchase on the illicit market. Some estimates indicate that 80% of purchases may still be from unlicensed sources.
Gov. Newsom is seeking increased spending for regulatory programs, hoping to force more unlicensed businesses into the legal market. California’s top cannabis official Lori Ajax said she intends to license more businesses and crack down on unlicensed operators this year. However, one speedbump in her plan is the fact that more than half of the municipalities in California have not established cannabis regulations, yet. That means businesses can’t operate there at all, as local licenses are required before operations can begin.
The issue at hand is not just licensing. Josh Drayton of the California Cannabis Industry Association said that steep taxes have kept people purchasing from their dealers. Under California law, there are multiple levels of taxation for the industry. While the state collects 15 percent, other levels of local and regional government are permitted to add their own taxes, which has resulted in tax levels approaching 50 percent in some localities.
Newsom says he is tackling the problem and that he will inspect the state’s cannabis distribution pipeline and investigate claims that local governments are gouging cannabis businesses.
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