California — among nearly a dozen states where recreational cannabis is legalized — ranks first among states that levy more cannabis taxes than alcohol levies.

But this comes at a time when the cannabis industry may not be happy with how much it is paying in taxes on its product. The Golden State collected $832 million from cannabis sales last year, according to a recent report by a think tank.

According to a 7 to 4 report, the Washington, D.C.-based Institute for Taxation and Economic Policy released a report on April 19 highlighting how the majority of the 11 states where cannabis is legal were collecting more excise taxes. on drugs than was paid. on alcoholic beverages. The 11 states collected taxes totaling nearly $3 billion from cannabis sales.

If and when pot becomes legal nationwide, the institute’s director of research Carl Davis believes “prices will come down a lot” for the fast-growing industry.

As the largest market of the 11 states, California voters approved of adult recreational use in 2016.

“That’s what we said all the time. The industry is a major economic contributor. At the same time, we have to make sure that the (cannabis) companies will survive. There is strong pressure for tax reform,” said Lindsay Robinson, executive director of the California Cannabis Industry Association.

Cannabis taxation at the state and local levels is a growing complaint in the cannabis industry. Cannabis business operators feel overtaxed and face many challenges, including too much product with a lack of places to sell it and a thriving illicit market competing for the pie of the market.

Robinson’s trade group also released a Reason Foundation report this month titled “The Impact of California Cannabis Taxes on Legal Market Participation.” This report examines the relationship between how imposing fewer taxes leads to better industry growth.

The adoption of Prop. 64 led to an initial wholesale crop tax of $9.25 per ounce. After adjustments for inflation, that rate rose to the $10.08 the state collects, beyond other hits on substance through the supply chain. The assessed retail excise tax is 15% of the assessed value of a retail sale to the consumer. In Sonoma County, indoor canopy growing operations must pay $12.65 per square foot in taxes. Outdoor growers pay $2.25 per square foot, according to county data.

In total, the state collected a cumulative total of $3.44 billion in cannabis taxes from January 2018 through December 2021.

“California’s tax rates are high compared to other states with mature markets”…and that “policy makers may consider reducing cannabis taxes in California for reasons other than economic impacts or tax”, concludes the study. He suggests that high taxes and fewer dispensaries push “consumers and producers into the illicit market”.

Shryne Group President Tak Sato opened a Stiizy cannabis dispensary in Sonoma County two weeks ago and plans to continue that growth to launch 15 more.

“The industry has seen phenomenal growth as consumers have learned to treat pain and insomnia with cannabis. It’s now considered a legitimate business, but of course taxes have to be worked on. Things just take time,” Sato said, responding to a common industry complaint that the drug still considered illegal by the federal government is overtaxed where it is legal.

Of the total number of cannabis retailers in the state, including delivery services (1,331), Santa Rosa has 21 dispensaries, according to the Reason Foundation study using data from the California Department of Cannabis Control. That’s about a fifth of what Los Angeles has.

The Reason Foundation study also recommends repealing the cultivation tax suspension, reducing excise duties on retail sales and promoting greater participation in the retail market. That advice has already been promoted in letters to lawmakers and Governor Gavin Newsom, who was due to release a revised budget on May 13.

“Hopefully we hear something (relief) from this,” Robinson said.

Susan Wood covers law, cannabis, manufacturing, technology, energy, transportation, agriculture, and banking and finance. For 27 years, Susan has worked for various publications, including the North County Times, Tahoe Daily Tribune and Lake Tahoe News. Contact her at 530-545-8662 or [email protected]