In the past, cannabis growers in California have been forced to pay a 15% tax on all their cultivated crops. Although this tax was a nuisance to many farmers, it was not that much of a burden until the Fall of 2021, when crop prices dropped by about 50%, and it made it more difficult for growers to turn a profit.
Luckily, on June 30th, California Governor Gavin Newsom signed a marijuana tax relief bill for all legal growers — providing much-needed support for local farmers.
The bill, AB 195, passed in both chambers and eliminates the marijuana cultivation tax — shifting the 15 percent tax on cannabis sales from the distribution to the retail level. In such a turbulent time, this bill will help farmers put more money into their businesses and help them build and upscale their marijuana production. Also, there will be no increase in the tax that the retailers will have to pay for at least three years under the proposal.
When asked about the new bill, Lindsay Robinson, the executive director of the California Cannabis Industry Association (CCIA), said, “Eliminating the cultivation tax is just one step towards stabilizing our industry, but it’s an important one. CCIA has worked for the past four years to eliminate the cultivation tax, and we’re extremely proud of this important first step. Stability of the cannabis supply chain brings jobs and much-needed tax revenue to the state while also protecting public health and safety and keeping cannabis out of the hands of children.”
The bill also rewards marijuana businesses that promote diversity and hire people with past marijuana-related offenses before it became legalized. Now, social equity marijuana businesses will be able to keep 20 percent of the excise tax revenue from their cannabis sales to reinvest in their business, and they will be open to getting a $10,000 tax credit. There will also be $40 million in tax credits to eligible retailers and equity operators.
To combat unlicensed marijuana sales, the bill will also fine landlords $10,000 per day if they rent their property to people growing and selling illicit marijuana. An additional $670 million in tax money will also be used for law enforcement to combat illegal growing, provide drug education for children, and help clean environmental problems caused by illegal growing.
Our opinion - Less Tax Means More Profit & Less Reliance on illegal Markets
Overall this is a huge step to help legal growers have the means to build their businesses legitimately and have the opportunity to thrive. These farmers have already gone through all the loopholes and red tape to become legitimate and do everything by the book, and they should be rewarded for following protocol.
Tax breaks and other benefits should also be given because the marijuana business has provided almost 4 billion in tax revenue since it became legal in 2018, according to the Department of Tax and Fee Administration.
Hopefully, this new legislation will be the beginning to a long road of helping small local cannabis growers find success and build their businesses to new heights. The more tax incentives and benefits the government can provide to growers and distributors will not only help stimulate the economy but also prevent people from going back to more illegal methods of distribution and growing.
In the end, it’s so important for states to treat legal marijuana businesses — small and large — with respect and continue to help small businesses and margenalized groups to have the tools to succeed.
