Several large cannabis companies in California say their industry is on the verge of collapse due to high taxes and a lack of retail stores.
A letter addressed to California Governor Gavin Newsom and other legislative leaders, signed by a few dozen cannabis company representatives, warns that the “current regulatory environment threatens the viability of California’s legacy cannabis operators.”
“(California’s legalization legislation) was not passed simply to raise tax revenue, but to end the illicit market, protect public health and safety, and create an accountable legal industry. Yet today, four years after the start of legal sales, our industry is collapsing, and our global leadership and legacy is at the brink of disappearing forever,” notes the letter.
Industry leaders are calling for an immediate lifting of the cultivation tax, a three-year reprieve from the excise tax, and more licensing of retail stores across the state. It’s estimated that about two-thirds of California cities remain without dispensaries since it’s up to local governments to authorize sales and production.
The letter argues that high taxes on growers and consumer producers make legal cannabis 50% more expensive than the illicit market, which they say still controls 75% of the overall cannabis market in the state.
It also argues that only 32% of the state has legal cannabis stores, with the other 68% of the state banning them through local bylaws.
“We need you to understand that we have been pushed to a breaking point and we will not remain on our knees. We will not stand for political interests to the detriment of our own livelihoods, the health of our citizens, the prosperity of our families and the state of California’s economy. For some of us, this has been our craft since back when the world thought it was a crime. This industry is California’s to lead globally. Listen to us. Hear us. Respect us. Represent us. Work with us. We are behind you. Act.,” concludes the letter.
The cannabis industry in Canada has raised similar concerns about the high level of taxation on their industry. The excise tax on cannabis in Canada is $1 a gram, which some argue impacts small growers even more than large ones.
Seventy-five percent of those taxes go to the provinces, while twenty-five percent goes to the federal government.
“The excise tax regime as it exists today, from the beginning of legalization, has ended up taxing micros, craft, and small to medium businesses upwards of 20-30% of their top-line revenue,” Dan Sutton of BC cannabis producer Tantalus Labs told Leafly earlier this year.
Sutton launched a campaign earlier this year, Stand for Craft, to highlight industry concerns with taxes making their business unviable.
“If you believe that small business deserves its place in the future of Canadian cannabis, we need your voice today,” he shared on Twitter.