California Department of Cannabis Control officials recently detailed Gov. Gavin Newsom’s revised 2022-23 budget proposal that included efforts to simplify the state’s cannabis taxing structure while creating an equitable market.
The Department of Cannabis Control said Newsom advanced a proposal to remove administrative burdens and costs while temporarily reducing the tax rate to support efforts to shift consumers to the legal cannabis market.
“We have heard from many of you who have said that the current cannabis tax framework is overly complex,” Department of Cannabis Control Director Nicole Elliott said via correspondence to the general public. “We know that current tax policies disproportionately burden cannabis farmers and small businesses and create instability throughout the supply chain, ultimately undermining the societal benefits of a taxed and regulated market.”
Proposed revisions, per the Department of Cannabis Control, include establishing the cultivation tax rate at zero beginning July 1, 2022; point of collection and remittance for excise tax shifting from distribution to retail on Jan. 1, 2023, at a 15 percent excise tax rate; and establishing Allocation 3 funding for youth education/intervention/treatment, environmental restoration and state and local law enforcement programs at a baseline three years, $670 million annually.
The cultivation tax would translate to lower consumer costs, with increased legal purchases offsetting any revenue losses over time. Additionally, Newsom’s proposal would have to pass the legislature with at least a two-thirds majority to be implemented.