Will California marijuana excise tax go up July 1?


Though the California marijuana sector has hoped for tax relief as it struggles to compete with a thriving illicit marketplace, a tax boost could be on the way.

A tax hike would hit cannabis companies’ bottom line and could drive a lot more shoppers into the illicit marketplace in search of less costly marijuana merchandise.

But an boost is not a foregone conclusion. Additionally, a tax reduce could happen.

The California Division of Tax and Charge Administration (CDTFA) makes use of a 60% markup price, along with the typical marketplace cost of wholesale marijuana, as a basis for the state’s 15% marijuana excise tax.

That markup price has to be recalculated each six months, and CDTFA Director Nicolas Maduros told an sector conference this week in Sacramento the excise tax may perhaps go up this summer time.

“We’re accountable for resetting that markup price each six months, so it will be reset July 1,” Maduros mentioned, when asked through a panel with other MJ regulators.

“It’s primarily based on marketplace information, and I believe especially as soon as … track-and-trace is a lot more totally utilized, that we’ll have some greater pricing information to figure out what that markup price should really be,” Maduros mentioned.

The state track-and-trace method launched in January but is only made use of by cannabis businesses with annual enterprise licenses.

And so far just a fraction of the legal businesses have obtained these permits, which implies most of the sector is not feeding information into the track-and-trace method.

“We’re administrators, so it is not up to us to sort of use that as a way to reduce or boost the tax burden. We’re basically seeking at what the details are. It is up to the legislature … to identify what the actual tax price is,” he mentioned.

When asked if the markup price – and hence the excise tax – could boost, Maduros mentioned: “It could.”

It is worth noting, nevertheless, that the price also could either lower or remain the identical.

A CDTFA spokesman mentioned in an e-mail that there’s also no cap on how a great deal the markup price could boost – or lower.

What a markup could imply

Maduros mentioned following the panel that any selection on the markup price and the excise tax will not be produced till June at the earliest.

The markup recalculation would not have an effect on the state cultivation tax, which is $9.25 per ounce of flower, $two.75 per ounce of leaves and $1.29 per ounce of fresh plant.

California Cannabis Business Association Spokesman Josh Drayton mentioned that a tax boost “would only additional harm the provide chain as it competes against the illicit marketplace.”

But, Drayton emphasized, it is feasible the excise tax may perhaps either remain the identical or even lower, and mentioned it is also early to inform what will take place with the CDTFA’s recalculation.

“I believe we require complete implementation of Metrc and track-and-trace just before we think about any boost,” Drayton mentioned.

“We have not observed any information that would help an boost in the excise tax for any component of the provide chain.”

Separately, a state bill to temporarily cut down state cannabis taxes is awaiting hearings in the California Legislature.

If profitable, Assembly Bill 286 would cut down the excise tax from 15% to 11% and suspend the cultivation tax till 2022.


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