California Cannabis Growers, Producers Call For Tax Reform As Industry Falters Under Burdensome Demands

The Sonoma County cannabis industry, whose legalization bid under Proposition 64 was approved by 59% of county voters in 2016, is joining forces with the Cannabis Business Association of Sonoma County (CBASC), a local trade association that represents plant-touching cannabis and hemp businesses and the Sonoma Valley Cannabis Enthusiasts (SVCE) in calling on the Sonoma County Board of Supervisors to immediately provide tax relief on the county as well as state levels.

Cannabis Is Over-Taxed…Why? Unlike other agricultural products, cannabis cultivation is taxed before production. California’s current cannabis cultivation tax is $9.65 per dry-weight ounce for flower; $2.87 per dry-weight ounce for leaves and $1.35 per dry-weight ounce for cannabis plants, all of which were announced to increase in 2022.

Adding insult to injury, news of the tax hike was publicized on the same day that California announced a $31 billion budget surplus for 2021 and a report from industry analyst BDSA showing that legal sales in the state fell by more than 11% year-over-year with a nearly 8% drop since August of this year alone.

“California cannabis is at a crossroads,” Erich Pearson, CBASC co-founder and CEO/founder of Northern California's SPARC family dispensaries told Benzinga. "It can either take drastic steps to prevent our market from collapsing or it can allow the thousands of small farmers who are known across the globe for producing the world's best cannabis go out of business to be replaced by a handful of mega-operators who may never step foot in California but will reap the benefits our reputation and our workers. That is really no choice at all."

Details supporting Pearson’s fear of a market collapse include the extremely slow roll-out of the nation's largest cannabis producer (California) where growers have been developing legal marijuana products since 1996, longer than everywhere but Amsterdam.

And There’s More: California has only 823 licensed dispensaries to serve over 29 million possible adult customers, which leaves 68% of the state completely unserved.

Politico recently reported California’s cannabis market is raking in up to $1 billion per month, of which only one-third is legal. The remainder is reportedly sold across the country on the illicit, or “traditional,” market, leaving licensed cultivators in “dire survival mode,” said local cannabis regulatory attorney Joe Rogoway. 

“Excessive taxation on cultivation by the county and by the state almost entirely benefits the illicit market, which is not taxed. Licensed cultivation businesses cannot maintain profitability, or even break even, under the current tax regime which is forcing many to go out of business,” Rogoway said. “Every licensed cultivator that goes out of business ends up creating a corresponding benefit to the illicit market."

Michael Coats, president of SVCE, supports the tax relief resolutions, adding that Sonoma Country's cannabis farmers desperately need a break. 

“Sonoma County has the promise, the land, the weather — it has everything we need to have a healthy and robust agricultural movement that will bring tourists and keep us on the map as a desirable place to visit. But none of that matters unless we’re able to protect our farmers,” Coats said.

Two resolutions are expected to be presented to the Sonoma County Board of Supervisors on Dec. 7.