Ripple Effect: ‘Ridiculous’ increase in cannabis tax hurts the legal cannabis industry in California
California increased its cultivation tax by 8.6% starting in 2022, and the owner of a dispensary in Northern California believes the tax hike hurts legal operations and boosts illegal operations.
Due to rising taxes on legal operations, Elizabeth Tabor, owner of La Florista dispensary in Weed and president of the city’s chamber of commerce, said her store has seen fewer customers and more illegal operations.
“It’s just helping them (illegal cannabis growers) thrive. And why not?” Tabor stated in the KTVL report.
“A lot of people are going to get that attitude. ‘I can do this by myself or with my buddy, for the almighty dollar.’”
Tabor’s final sales are affected by this year’s 8.6% increase to cultivators, 7.5% California sales tax in the city, 15% state excise tax on cannabis, and the 3% tax on Weed.
“It’s just ridiculous,” Tabor stated.
“You might have a cultivator getting taxed this, but you have a manufacturer that’s making creams, anything outside of the flower is taxed differently. And then they figure out what to charge the retailer to turn around and put it out to the consumer to reimburse the trickle-down of taxes for it to go out the door. Yes, it’s very complicated. It should be something straight across the board.”
Tabor said with those tax costs trickling down to the customers at her store, 37.5% of the customers’ final price at La Florista is attributed to tax.
“We knew this would take a few years to iron out the fine details until we get it right and California needs to get it right,” Tabor said.
Tabor responded that the state of California needs to scale back its taxes on legal cannabis in order to “get it right,” regarding taxing the industry.
“I just feel if there was more public comment or maybe even from cities or counties to say, ‘hey, we want the taxes for our local area and we appreciate that. But, we’re not going to get that money if you’re going to keep taxing this to where the companies that we’ve allowed here that are really looking forward to this, out of business.’” Tabor said.
“Because then, what was the point of it all?”
Just last week, the only other dispensary of weed, Perfect Union, right across the street from La Florista on Main Street, closed its doors.
Compared to January-March of 2021, Tabor’s shop’s sales have dropped 80% year-to-date in 2022.
Her dramatic decline in sales is attributable to a rise in cannabis prices from higher taxes, as well as less unemployment and stimulus money being passed out by the federal government to spend on her products.
Tabor said she raised the price of her cannabis products by 12.5% this year as a result of the 2022 tax increases.
“I, being the furthest dispensary in Northern California, I’ve got Oregon to contend with,” Tabor said. “I’m not worried about the guys down in Shasta Lake City, I’m worried about an hour above me north where there’s an overabundance and not much tax.”
In 2021, cannabis taxes brought in $105,000 to the city of Weed, according to mayor Kim Greene. The 15% state excise tax on cannabis, along with the 3% city excise tax, help fund their public safety departments like fire and police. The cannabis tax money also helps Weed with road repairs and beautification projects.
The city can expect to bring in less money with the increase in taxes in 2022, she said when asked.
“I actually probably expect less. Because what’s happened is, in my opinion, the state did not collect the amount in taxes that they anticipated, so rather than talk to the people who actually do the business and come up with something, they just increased the tax,” Greene stated.
“Well, what that’s doing is it’s driving people to the black market.”
The tax revenue from cannabis in quarter one of 2022 in California is not yet official.
According to Mayor Greene, rising prices discourage customers from buying cannabis at stores such as La Florista. More so, this trend discourages store owners from continuing their cannabis businesses.
“I truly believe that they’re going to see that raising the taxes actually brought them in less money,” Greene said.
“In order to make this a thriving business for the entire state, that tax needs to be backed off.”
In order to get California to roll back these cannabis taxes, Greene said that lobbyists should keep letting the state know how the higher taxes benefit illegal growers, which is hurting the legal cannabis industry.
“They’re building the plane as it’s flying,” Greene said, referring to the state’s attempts to create a fair and effective tax system for the cannabis industry.
Tabor hopes for fewer taxes and a standardized tax on cannabis in the supply chain for the sake of her customers and business at La Florista.
By doing so, cannabis cultivators, manufacturers, retailers, and customers would not all pay separate taxes, which she calls “ridiculous.”