Cost of MMJ Rules Could Leave CA’s Black Market Untouched

Will California’s forthcoming medical marijuana regulations eliminate the state’s cannabis black market?

Not if the costs for businesses to participate are too onerous, MMJ growers and retailers say.

The regulations will cost an estimated $20 million-$50 million to implement and maintain, according to the Press-Democrat of Santa Rosa, citing a legislative analyst’s report.

Oversight would be paid for by industry license fees, which – assuming 5,000 annual applications – would have to cost about $4,000 apiece to cover the lower end of the estimate, the newspaper reported.

Hezekiah Allen of the Emerald Growers Association told the paper that it would cost growers $50,000 each over three years to pay for compliance. Growers in California average annual net household income of just over $100,000, about 30% of gross revenue in a high-cost industry, according to a survey done by the association.

State Sen. Mike McGuire said he plans to introduce a bill next year establishing a 15% statewide retail sales tax on medical cannabis, which would be assessed on top of current sales taxes of about 8%.

Only 25-30% of dispensaries are already paying their required taxes, said an official with the California Board of Equalization, which collected $44 million in sales taxes from dispensaries last year.

Add all that up, and it means existing California cannabis businesses could have a powerful motive to disdain a new legal regulatory system for marijuana.