California’s 2018 cannabis tax haul of $345 million falls short of projections

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California’s 2018 marijuana tax-revenue tally is in, and once more, it’s far below what the state had projected.

According to a news release from the state Department of Tax and Fee Administration, the fourth quarter of 2018 brought $103.3 million in marijuana tax revenues, not including city or county taxes.

That brings the year’s total to just over $345 million, far short of the $643 million originally projected for the year by former Gov. Jerry Brown’s administration.

Why is the California marijuana industry, which is continuing to grow and stabilize, underperforming expectations?

MJ businesses – as well as some lawmakers and regulators in the state – have pointed to the following challenges faced by the cannabis industry, according to the Orange County Register:

  • Issues surrounding the regulatory framework.
  • High state taxes burdening cannabis companies.
  • Municipalities’ widespread bans on MJ firms.
  • A thriving – and possibly expanding – illicit market that’s severely undercutting legal cannabis businesses.

Although tax revenues climbed throughout 2018 – the first quarter of 2018 brought in just $60.9 million, the second increased to $80.2 million and the third hit $100.8 million – the totals reflected a state government caught off-guard by a resilient underground market, which is still widely comprised of businesses that were shut out of the regulated market in one way or another.

Roughly two-thirds of the cities and counties in the state remain off-limits to marijuana companies, and illegal competitors – especially in Southern California – continue to undercut legal competitors by not paying taxes or passing those costs on to consumers.