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Report: California Cannabis Taxes Could Hit 45%

According to a Fitch Ratings report, cannabis taxes in California could reach as high as 45 percent in parts of the state once the adult-use market comes online, CNN Money reports. The analysis found that consumers will pay sales tax ranging from 22.25 percent to 24.25 percent, including the state’s 15 percent excise tax, and local sales taxes from 7.25 percent to 9.25 percent.

By comparison, Washington’s tax rate is about 50 percent, Colorado and Nevada’s rates are 36 percent, and Oregon’s adult-use rate is about 20 percent.

In California, cannabis businesses will pay gross receipt taxes from 1-20 percent, or $1 to $50 per square foot of canopy. Farmers will pay $9.25 per ounce for flower and $2.75 per ounce for leaf – which, combined, according to the Fitch report, could keep some illicit producers in business.

“California’s black markets for cannabis were well established long before its voters legalized cannabis in November 2016 and are expected to dominate post-legalization production,” the Fitch report says, adding that other legal states have already lowered their “initially uncompetitive” tax rates. According to the CNN report, Oregon launched its program with a $35-per-ounce weight-based sales tax but later modified it to a 20 percent sales tax. Washington’s roll-out included a 25 percent tax rate on producers and another 25 percent on processors on top of a 25 percent sales tax; it was changed to a 37 percent flat sales tax along with state and local taxes.

In Colorado, regulators actually raised the rate – scrapping its 2.9 percent sales tax and replacing it with a 10-15 percent excise tax rate.

According to the Fitch report, Massachusetts’ cannabis tax rate is expected to be around 24 percent when it comes online next year. Massachusetts has not yet established its rate.

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