California tax agency confirms it will raise cannabis excise rate to 19% on July 1

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Despite the concerns of California’s regulated marijuana industry and lawmakers, the state’s tax agency says it will carry through on plans to increase the cannabis excise tax rate from 15% to 19% on July 1.

The 26% increase, announced by the California Department of Tax and Fee Administration on Thursday at a cannabis advisory meeting, is the highest allowed under state law, SFGate and WeedWeek reported.

The increase – the brainchild of Gov. Gavin Newsom, who is facing annual budget deficits in California projected to be in excess of $10 billion – was required if cannabis excise revenue fell.

And fallen it has, with California marijuana companies closing because of high taxes, competition from a booming illicit market and regulation-induced business expenses.

The executive director of the California Cannabis Operators Association, a new trade group representing the state’s largest marijuana retailers, told SFGate that the state’s MJ operators won’t be able to pay the higher taxes.

“We’re urging the Legislature and Administration to act quickly and freeze the tax at 15%. If we want a regulated market to survive in California, the time to intervene is now,” Amy O’Gorman Jenkins said via email.

To that end, Assembly Member Matt Haney, a San Francisco Democrat, in January introduced Assembly Bill 564, which seeks to keep the cannabis tax at 15%, with no adjustments allowed.

The measure advanced out of the Assembly Business and Professions Committee on April 22, according to Capitol Weekly, and now moves to the Assembly Revenue and Taxation Committee.

“With every new tax, we’re pushed to the edge of survival,” Rami Kassis, the general manager of Mission Cannabis Club, a legacy retailer in San Francisco, told MJBizDaily in April.

“With the upcoming tax hike, we anticipate a decline in consumer spending, particularly reflected in a drop in average basket size – a trend consistently observed in previous years following similar tax increases.”

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