California Cannabis Tax Rate May Be Temporarily Reduced

California is a mere three months into legalizing recreational cannabis, yet, the state may already be looking to make changes to the law. A bipartisan bill was introduced on March 14th, 2018 in the state assembly that would lower the California cannabis tax rate. The bill was introduced as an attempt to minimize the impact of the successful illicit cannabis black market.

Republican Tom Lackey stated, “Criminals do not pay taxes, ensure customers are 21 and over, obtain licenses or follow product safety regulations. We need to give legal businesses some temporary tax relief so they do not continue to be undercut by the black market.”

How California’s Cannabis Tax Laws Will Change

Assembly Bill 3157 would lower the California excise tax on cannabis from 15% to 11% and also eliminate a tax on cannabis cultivation for a period of three years. The sponsors of the bill believe that these measures would provide California cannabis consumers with a nearly 10% tax break at the register.

The main reason for cutting existing cannabis taxes is to undercut the thriving black market. Beginning January 1st, 2018, when recreational cannabis officially became legal in California, consumers began to notice increased taxes. The taxes that come with a regulated California cannabis market in very high. Steve DeAngelo, CEO of Harborside – a well known dispensary in Oakland, CA – said that when recreational cannabis became legal, “In our shop here, the tax rate has gone from 15 percent all the way up to almost 35 percent for adult consumers.”

With that being the case, many consumers decide to stick with the illegal and unregulated black market in an effort to save money. Though California expects to see over $1 billion in profits from cannabis taxation this year, the black market is the one primarily benefiting from high state tax rates.

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“Get It Right In The Beginning”

Democrat Assemblymember Rob Bonta, a co-sponsor of the bill, had the future in mind with AB 3157. He expressed what many in California have been thinking by saying that, “If we don’t get it right in the beginning, it will be hard to make up for it later and correct in the future.”

California’s cannabis program, like many of the other states in the U.S. experimenting with legal recreational and medical cannabis, is still in its infancy. If AB 3157 is any indication, the state’s laws surrounding cannabis will be flexible over the coming years. Due to the bill’s bipartisan support, consumer contempt with California’s high tax rate, and a thriving black market, the bill has a very good chance of passing in the California state legislature. Retailers, cultivators, and consumer would see their taxes reduced and the cannabis black market will shrink.

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