California Raises Cannabis Business Taxes, And Legal Operators Worry It Will Drive Illicit Market Growth

The California Department of Tax and Fee Administration has announced that it will increase taxes on the regulated cannabis industry yet again. The markup rate for the marijuana excise tax will increase from 60% to 80% on New Year’s Day.

This rate is used to provide the basis for California’s 15% excise tax. This move will only further oppress an already weak legal market and fuel the thriving illicit market, industry participants said. Among the California industry operatives expressing concern as the market struggles to meet expectations and profitability is Ben Larson, board member at the Cannabis Beverage Association and CEO of Vertosa.

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“If the state is looking for another way to give a boost to the illicit market and drive more companies out of California that are trying to engage in the legal market — this is it. Well done,” he said. 

Cynthia Salarizadeh, founder and president of the California-based premium cannabis products company House of Saka, said the taxes are beginning to make profitability impossible.

"[The] cost of goods are so high in the legal cannabis market that any additional taxation kills our margins and will hurt smaller businesses, along with the bigger ones.”