Legal cannabis sales in California experienced an 11% sales drop during the first quarter of this year, compared to last year, the largest such decline in the history of legal cannabis sales in the state, SFGate reports. Sales during the first quarter totaled $1.088 billion.
Tamma Adamek, a spokesperson for the California Department of Tax and Fee Administration, told SFGate that comparing quarter-by-quarter totals is like comparing “apples to oranges” because tax figures are always being updated as more shops file their tax reports and that officials “know that gap will shrink.”
According to a state Department of Cannabis Control analysis published this year, legal cannabis sales comprise just 38% of the overall cannabis market in California in 2024. The report noted challenges faced by cannabis companies, including a 57% decline, adjusted for inflation, in wholesale cannabis prices as of Q4 2024 compared to average prices in Q4 2020; a 46% decline in indoor-cultivated cannabis prices; a 74% drop in outdoor-cultivated cannabis prices down; and a 60% reduction in mixed-light-cultivated cannabis prices during the same period. The report notes a “continued” decrease in retail prices through the first half of 2024.
Despite the price decreases industry-wide and the fact that the majority of cannabis sales in the state are still occurring outside of the regulated market, the state excise tax will increase from 15% to 19% on July 1, which could further contract the market and push more consumers into the unlicensed market. In a March update, the California Legislative Analyst’s Office suggested the “tax hike will reduce the size of the licensed cannabis market” and “will offset only a small share of the revenue raised by the tax hike.”
A bill to block the tax increase has passed the state House but still needs approval from the state Senate and would need to be signed into law by Gov. Gavin Newsom (D).
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