It isn’t easy to be a part of the California cannabis industry if you don’t have deep pockets. For instance, there are many taxes and changing regulations you have to deal with. Together California’s cannabis cultivation tax and excise taxes were choking money out of struggling distributers.
As a result, California cannabis growers and allies have protested the local government about the over-taxation that drove several growers out of business. However, as of July, they will start to see their effort realized with a temporary tax cut and a decrease in payment responsibility.
California Excise Tax Reduction for Growers
The bill that decreases excise taxes in July is another win for California growers aside from the cultivation tax being slashed to $0. The excise taxes rate impacts the markup between the wholesale cost and retail selling price of cannabis products. The reduction also comes with the responsibility change of paying excise taxes. In other words, distributors will now charge their retail customers for the excise tax.
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Mark-up Rate Reduced
Since the beginning of January, there has been an 80% markup for wholesale cannabis. Then, the California Department of Tax and Fee Administration adjusted the rate down to 75%. As a result, the calculated excise tax is now 26.25%, down from 27%.
Within the bill that passed getting rid of the cultivation tax, there is a paragraph that increases the excise tax in the future. The first increase would take place on July 1, 2025, and the second would come exactly a year after that. According to 420 CPA, some industry experts speculate that the rate in the future would increase by 4%, raising the excise tax to 19%. This would mean distributors would be required to charge 33.25% in taxes to retail buyers.