California Cannabis Taxes Hit $270M In Q3: Funding Used For Research, Social Initiatives, Schools & More

The California Department of Tax and Fee Administration (CDTFA) reported that cannabis tax revenue for the third quarter of 2023 hit $269.3 million. This includes California's cannabis excise tax, which generated $156.9 million, and $112.4 million in sales tax revenue from cannabis businesses.

Previously reported revenue for the second quarter of 2023 returns was revised to $285.1 million, including $164.8 million in cannabis excise tax, and $120.3 million in sales tax. Revisions to quarterly data result from amended and late returns and other tax return adjustments.

From $2B To Over $5B Industry

“My immediate reaction is: That’s fantastic. Those tax revenues are amazing,” David Dallal, chief financial officer of Torrey Holistics, a recreational marijuana dispensary told NBC 7. “Legalization has been a great thing for the state.”

“The industry went from $2 billion in 2018 to over $5 billion now," Dallal said. "That’s over 160% increase in the short time that the industry has been around."

Vendor Compensation Program

These figures reflect the new vendor compensation program in which eligible cannabis vendors retained $612,300 in vendor compensation during the second quarter. Starting April 1, 2023, cannabis retailers eligible for the vendor compensation program may retain 20% of the cannabis excise tax due on their retail sales of cannabis or cannabis products for 12 months. Cannabis retailers must be approved by the Department of Cannabis Control and CDTFA before claiming vendor compensation. The program runs through December 31, 2025.

The third quarter figures also reflect $622,320 in excise tax credits claimed by retailers who paid excise taxes to distributors under the previous tax structure. Starting January 1, 2023, cannabis retailers were required to collect, report, and pay the cannabis excise tax.

Since January 2018, total cannabis tax revenue has been nearly $5.5 billion, including nearly $2.8 billion in cannabis excise tax and nearly $2.2 billion in sales tax.

Funding Good Things

Dallal shares that huge tax revenues have helped change some of the stigmas sounding the industry.

"Legalization has pushed a lot of the illicit market aside — and money that was going to nefarious things," Dallal said. "Now that money is going to good things."

Collected cannabis tax money is used to support state-funded projects like transportation initiatives, environmental causes, drug prevention efforts, schools, libraries, and universities.

Dr. Igor Grant, the director of UC San Diego’s Center for Medicinal Cannabis Research, which gets $2 million in annual funding from marijuana tax revenues, said “I have been impressed that the government of California has been forward in this sense,” said CMCR.

"I don’t know of any other state that has provided research on this topic. We now have two dozen studies that are funded by that tax program.” 

The CMCR is researching everything around marijuana from policy to the clinical benefits and limitations, including studies on the effects of medical marijuana on people with arthritis, MS, diabetes and more.

See Also: California Cannabis Update: Market Woes, Farmers' Resilience, Safeguarding Privacy And More

Photo: Benzinga edit with images by nneem, OpenClipart-Vectors from Pixabay, and Maarten van den Heuvel on Unsplash