Tax Relief

California hashish firms ask Governor Newsom for tax breaks

In a Boston Tea Party-style tax riot on the west coast, about 30 cannabis leaders from across the state signed a letter Friday urging the state to abolish taxes paid by breeders, a three-year grace period for point-of transactions -Sale and open up more retail opportunities.

The petition to California Governor Gavin Newsom, Senator Pro Tempore Toni Atkins and Assembly spokesman Anthony Rendon aims to close the state budget next year, which is in surplus of $ 31 billion, on January 10th. Any change in cannabis taxes would require a two-thirds majority in the California legislature.

A rally is scheduled on January 26th on the steps of the State Capitol in downtown Sacramento to raise industry concerns.

From growers to retailers, the coalition painted a picture of “frustrated” cannabis operators on the verge of a potential market collapse as the price of legal products has fallen compared to the illegal market. The current rate has fallen from around $ 1,500 a pound to $ 300-500. Some operators have claimed that they pay more taxes than they earn.

Cannabis operators called it “offensive to injury” and said they had reached a tipping point when the state announced plans a few weeks ago to increase the cultivation tax rate from $ 9.65 to $ 10.08 per weighted dry ounce next year. The state said the tax hike was an inflationary maneuver.

However, the industry argued that the product is being over-taxed throughout the supply chain. Local governments also collect. For the North Bay, Sonoma County taxes a dozen types of licensed growers between $ 1.12 and $ 12.65 per square foot, depending on the category. Two Sonoma County cannabis groups sought relief from county taxes earlier this month.

Meanwhile, the industry generated $ 42.4 million in crop taxes in the state’s third most recently reported quarter of the total tax revenue of $ 322.3 million paid by farmers to the state; $ 168.9 million excise tax; and $ 110.9 million in sales, reported the California Department of Tax and Fee Administration.

“Without significant change, many, if not most, licensed cannabis companies will be faced with a desperate choice: pay exorbitant taxes into a system designed for failure or pay employees to feed their families. Neither of us would like to make that choice, ”the letter says, explaining that the industry is“ reaching a predetermined breaking point ”.

Based on the passing of Proposition 64, which was passed in 2016 and made recreational use by adults possible in the state, cannabis operators claim that the initiative was aimed at displacing the illegal market and making it safer for users. But the California cannabis system that manages the tax and licensing program has been viewed as a “nationwide ridicule,” according to the letter.

When asked if operators would be willing to give up their licenses if nothing happens and pressured to do so, cannabis executives told the Business Journal at the Friday morning press conference that they would stand before a full statement on refusing to pay taxes numbers.

“Losing our licenses through a tax boycott is the last resort. What the industry is saying is there is almost nothing left to lose, ”said Tiffany Devitt, director of government and consumer affairs at CannaCraft, a large manufacturer based in Santa Rosa.

This comes days after Nicole Elliott, the director of the California Department of Cannabis Control, reminded disgruntled cannabis operators that paying taxes is a legal matter.

The department recently took steps to streamline regulatory processes, and Elliott-Warning could claim a change.

“It’s important to understand that changes to the July 2021 cannabis trailer laws now require regulatory improvements to the regular rulemaking process that can take a significant amount of time to complete,” Elliott told the Business Journal.

But time is of the essence for industry operators who have said they had to borrow money from family members and withdraw funds from 401,000 retirement plans.

To gain a foothold in public opinion in the interests of speeding up the process, the conference call raised a possible voting initiative to cut tax rates, but Lindsay Robinson, executive director of the California Cannabis Industry Association, told attendees the effort would cost at least 20 million US dollars.

Instead, the industry is calling for the state to completely abolish the cultivation tax at the front end of the supply chain. There are also plans to give pharmacies three years off to collect consumption taxes – those point-of-sale transactions to which California Senator Mike McGuire, D-Healdsburg, proposed the transfer of cultivation taxes. The industry also wants legal access to be expanded across California, which is only about a third of the state.

“Our members and colleagues across the legal supply chain have made it clear that the current tax system and lack of access to retail stores make it nearly impossible for many of them to survive in the current landscape,” Robinson told the Business Journal.

Susan Wood covers law, cannabis, manufacturing, biotechnology, energy, transportation, agriculture, and banking and finance. For the past 25 years, Susan has worked on a wide variety of publications, including the North County Times, now part of the Union Tribune in San Diego County, along with the Tahoe Daily Tribune and the Lake Tahoe News. She graduated from Fullerton College. Reach her at 530-545-8662 or susan.wood@busjrnl.com

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