Cannabis Taxes in Cali Won’t Go up for Another Year Thanks to This New Law
State taxes on cannabis will not rise for at least another year after Governor Gavin Newsom signed Assembly Bill 1872 into law. Marijuana Business Daily reports that the new law prohibits the California Department of Tax and Fee Administration from adjusting the cannabis excise tax markup amount until July 1, 2021.
Representatives from the cannabis industry in California aren’t opposed to the new law. However, some believe that it will not do enough to lessen the heavy tax burden on the cannabis businesses operating in the state. With this in mind, they state that it will still be challenging to cope with the illicit market’s progress.
This is especially true when considering what could happen to the cannabis industry due to wildfires.
Outdoor grows are currently being damaged and annihilated by the wildfires in California. While this in and of itself is problematic for growers, the impact that will be had down the line is far worse.
The legal cannabis industry is heavily taxed, already putting it at a disadvantage competing against the illicit market. But when considering the fact that limited amounts of flower will be available due to damage from the wildfire ashes, it’s apparent that the illegal market will still have the upper hand.
Damaged flower will not be allowed in the legal market, and this will probably cause a shortage in product and a raise in price for legal dispensaries. Price rises are inevitable if these retailers plan to maintain their margins, and many consumers could be forced to source their products on the illicit market.
Legal operations will have difficulty competing on prices. This is especially the case when considering the damaged cannabis will likely sell for cheap on the illicit market.
Even with the taxes remaining the same, the legal cannabis sector is likely in for a rough year as it continues to struggle competing with an unregulated market.