California’s cannabis retailers are ready to revolt.
Already taxed to the tune of $166 million in annual state cultivation taxes, news of a 4.5% tax increase coming at the start of 2022 is pushing a group of ganja farmers and weed merchants to consider how they can best protest what they feel amounts to taxation without representation.
With an oftentimes dangerous, widely valued job to do, legal operators within the industry are speaking out about the disadvantages they share by being legally licensed when everyone from illegal grow operators and cannabis cartels to your friendly neighborhood dope peddler doesn’t have to pay a dime in taxes of regulatory fees. One reason the black market for cannabis is estimated to still be twice the size of the legal market.
As it stands, these taxes are extremely high compared with other industries. And don’t come with the same safeguards that many other enterprises share when it comes to unfair competition and guaranteed safety.
“That’s really how it feels right now in cannabis,” Jerred Kiloh, the owner of L.A. dispensary Higher Path and president of United Cannabis Business Association, tells Mercury News. “Everyone is taking the money and no one is doing anything to protect our industry.”
The tax situation, despite California’s potential $31 billion surplus, is causing many in the industry to quit, go back to illegal growing or dealing, and consider how to make their voices heard. In fact, those who are intent on remaining in the regulated game are considering making a dramatic statement by withholding their tax payments.
Currently, payments involve a web of levies, including a 15% excise tax and an 8-10% state sales tax, as well as various city and county taxes. All of these duties, as well as a tax-by-weight on cultivators, help drive up retail prices. Which you as a consumer feel every time you go to the dispensary and wait 10 minutes watching some senior citizen in front of you asks lengthy questions about any and all available CBD products.
The sky-high taxes mean that these dispensaries are having a rough time turning a profit, part of the reason demand is falling fast for licenses to sell cannabis, dropping by about 6,000 in the last few years.
At the same time, regulated businesses don’t feel their interests are being protected from illegal competition. Currently, a promise in Prop. 64 that money raised through cannabis taxes will go to fight drug abuse, bolster programs for at-risk youth, environmental restoration, cannabis studies, efforts to stop stoned driving, and other stuff, means a perceived short shrift for enforcement.
A Department of Cannabis Control meant to target illegal marijuana sales is seen as somewhat feckless given the state’s lax penalties for cannabis crimes. Meaning offenders are often able to shrug off the consequences and start anew under a new name or operation.
All of this has industry vets like Kiloh feeling like there’s no one in our state's legislature to support cannabis businesses. And despite encouraging support for a revision of cannabis taxes, even by the governor himself, changing the fees would require Californians to vote on them for any big changes to occur.
The new taxes, set to take effect on Jan. 1, are said to be inflation-based and non-negotiable through June. Right now, sensimilla farmers are being hit by a double whammy of rising taxes and an oversupply of herb, which is already causing the prices for this holy sacrament to plunge.
This brings us to the suggested tax revolt. Figures like Kiloh have discussed forming a California Weed Party to demand better representation, once suggesting that operators put their estimated tax payments in escrow rather than hand them over to the State. However, he pulled back over his attorney's warnings that the move could find their licenses stripped. Or worse.
In an op-ed on Medium, Flow Cannabis and Flow Kana owners Michael Steinmetz and Flavia Cassini recently renewed support for this action, recommending to their company’s board that it withhold cultivation taxes after July 1, 2022, “until we see real, actionable change,” and inviting their industry peers to join them.
With desperation rocking a promising economic powerhouse for the state and a complicated and expensive morass of fees limiting vendors’ profitability, it appears something will have to give soon for legal cannabis to reach its potential and benefit those who grow, move, serve, and consume it.
In the meantime, we await further updates before completely severing any current party affiliations to join the California Weed Party. As eager as we are to see that on our voter registrations.
