Illicit market cited as CA nets only $74 million on second-quarter marijuana taxes

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California state cannabis taxes, Illicit market cited as CA nets only $74 million on second-quarter marijuana taxes

California cannabis taxes continued to miss expectations in the second quarter of 2018, bringing in roughly $74 million to state coffers.

The state’s thriving illicit market is likely a big reason, as is the fact that most local governments in California still prohibit legal marijuana businesses and sales.

“After six months of legal cannabis sales, there is a staggering … gap between today’s tax revenue numbers and what voters were promised,” said state Assemblyman Evan Low, a Democrat from Campbell who heads the Business and Professions Committee.

“Regulators must adapt before California’s lawful cannabis businesses are obliterated by the black market.”

Businesses say hefty tax rates that can approach 50% in some areas are driving business underground.

According to a news release from the California Department of Tax and Fee Administration (CDTFA), the cannabis tax haul from April 1 through June 30 was $74.2 million, including $43.4 million from the excise tax, $4.5 million from the cultivation tax and $26.2 million from the sales tax.

That brings the state tax total for the first half of 2018 to roughly $134 million, including just under $61 million that was collected in the first quarter, according to the release. The figures don’t include local taxes from municipalities and counties.

The state tax revenues stand in contrast to a projection from Gov. Jerry Brown’s office that California would take in $175 million in the first six months of 2018, meaning the industry is still underperforming even though the second quarter did experience a bump.

To help licensed cannabis companies pay their taxes properly, the CDTFA said it has:

  • Opened a new satellite location in Humboldt County.
  • Established an MJ tax advisory group.
  • Launched a pilot program to help retailers pay their taxes.
  • Beefed up security measures for financial transactions.

Associated Press contributed to this report.