More than two years since the industry kicked into gear in 2018, commercial cannabis sales in California has already scored more than $1 billion in taxes as of February 2020, the California Department of Tax and Fee Administration (CDTFA) revealed last week.
As indicated in the figures released, cannabis tax revenues have totaled to $1.03 billion, with $498.1 million extracted from cannabis excise taxes, $123.4 million from cultivation taxes, and $403.1 million from state sales tax.
Most of the money, aside from covering regulatory costs, has been used to finance a variety of state-sponsored programs, including cannabis research, public safety grants, childcare for low-income families, and environmental clean-ups due to illegal cannabis grow, the official explained.
While the high record suggests a celebration for industry insiders and advocates, many were still concerned over the sluggish growth of California’s legal cannabis industry, especially with the ongoing competition between the legal industry and the thriving underground cannabis market.
“It’s an industry that was supposed to be huge, going gangbusters with the green rush,” said Zachary Pitts, the chief executive of the Ganja Goddess delivery service and president of the California Cannabis Delivery Alliance. “It has been growing, but it’s not nearly where I think people were expecting it to be.”
In 2016, California voters approved the legalization of recreational cannabis and state officials projected around $1 billion a year in taxes once the legal industry matures. However, two years since the industry launched, growth has been found to be lower than expected.
As presented by the California Department of Tax and Fee Administration, growth in the industry in the fourth quarter of last year only scored about $2.6 million increase or 1.5%, a record that has been marked to be the smallest quarter-to-quarter gain in tax revenue since the market launched in 2018.
To date, under the current state law, those who engage in the legal cannabis market are to pay a 15% excise tax, a cultivation tax based on weight, and state sales tax. Cities and counties have also been allowed to tack on their own taxes, which can hit as high as 20%.
Jerred Kiloh, President of the United Cannabis Business Association, the premier cannabis retail association in California, said lowering those taxes could help advance the growth of the legal market, especially in competing against underground operators. California was able to seize a total of $1.5b worth of illegal marijuana in the past few months.
“Somewhere along the supply chain, we need to lower the cost of doing business,” Kiloh commented.