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"New California Bill Proposes an End to the Cannabis Cultivation Tax":
February 17, 2022

Introduced Feb. 15, Senate Bill 1074 suggests an end to the flat-rate cannabis cultivation tax in the state of California. If passed, the dry-weight tax on growers’ yields would fall off the books July 1.

The current tax rate is $10.08 per dry-weight ounce for flower and $3 per dry-weight ounce for leaves.

First enacted as part of the Medicinal and Adult Use of Cannabis Regulation and Safety Act (MAUCRSA) in the wake of 2016’s Prop. 64 vote, the cultivation tax has been the target of cannabis growers’ ire. It’s been seen by many as a hurdle for those growers interested in leaving the traditional market and finding a home in the newly regulated and licensed cannabis marketplace—one more financial burden.

State Sen. Mike McGuire, a North Coast Democrat, hopes to put an end to that tax.

However: “The bill would increase, from July 1, 2025, until July 1, 2026, the excise tax by an additional percentage that the Department of Finance estimates will generate half the amount of revenue that would have been collected pursuant to the cultivation tax, and would, beginning July 1, 2026, instead increase the excise tax by an additional percentage estimated by the department to generate the full amount of revenue that would have been collected pursuant to the cultivation tax.”

In other words, some of the financial losses the state will cede, in the event this bill passes, will be recouped by shifting the tax assessments over to the retail segment. As things stand now, the excise tax rate sits at 15%.

During the first three quarters of 2021, the combined cultivation and excise taxes brought in almost $1 billion. A good portion of that money—$400 million in the current state budget—is bracketed for child care and prevention services aimed primarily at California children living in poverty.

“That’s why these Prop 64 dollars are so critical,” Marianna Hernandez, a prevention manager at Community Coalition, an advocacy and social justice group based in South Los Angeles, told NBC News. “Any cuts to cannabis tax rates will result in cuts to child care for mostly children of color living in poverty who need that access now more than ever.”

And it’s not just at the state level that the industry is seeing tax reform materialize in legislation: Monterey County is also considering cutting its various tiers of flat-rate cultivation tax.

With the price of cannabis flower dropping precipitously, and particularly for outdoor growers along the West Coast, the flat-rate cultivation tax model exasperates financial pressures that have dogged licensed growers since MAUCRSA was first passed. Alongside inflationary adjustments, “[the tax] goes up as a percentage as prices compress, and [it] hits outdoor farmers the hardest,” Glass House Brands President and Co-Founder Graham Farrar told us last month as Gov. Gavin Newsom called for this very reforms.

https://www.cannabisbusinesstimes.com/article/california-bill-proposes-eliminating-cannabis-cultivation-tax/