In a bid to combat black-market operators, two California state lawmakers have introduced a measure to lower the cannabis tax rate for three years, which should in turn lower the prices retailers charge for legal products.
“We need to give legal businesses some temporary tax relief so they do not continue to be undercut by the black market,” Assemblyman Tom Lackey, a Republican from Southern California, said in a statement.
The bill would drop the state excise tax on cannabis products to 11% from 15% for three years, until June 2021. It would also suspend the cultivation tax that growers now pay.
The measure – technically an amendment to an existing bill, AB 3157 – would in effect cut the prices that consumers pay for medical and recreational products by roughly 9%, based on analysis by New Frontier Data, according to a news release from Lackey’ office.
In addition to the existing 15% excise tax, the state’s current marijuana tax structure includes a cultivation tax of $9.25 per ounce of cannabis flower or $2.75 per ounce of leaves. The cultivation tax translates to $148 per pound.
Add on local taxes, and the cumulative tax rate for many California consumers can be as high as 45% in some parts of the state, according to the Fitch Ratings agency.
The bill “reduces the tax burden on the licensed cannabis market during this transition period, keeping customers at licensed stores and helping ensure the regulated market survives and thrives,” Bonta said in the release.