California Ends Cannabis Cultivation Tax

California Gov. Gavin Newsom (D) signed the state budget on Thursday which included the elimination of the state’s cannabis cultivation tax and a cap on the cannabis excise tax at 15% for three years, the North Bay Business Journal reports.

Amy O’Gorman Jenkins, a lobbyist for the California Cannabis Industry Association, told the Journal that she was “celebrating” the end of the cultivation tax, which many blamed for the state’s high cannabis prices and strong unregulated marketplace. A report by the Reason Foundation in May suggested that monthly cannabis tax revenues could double by 2024 were the cultivation tax to be eliminated.

“The Legislature seems to have grasped a lot of what’s affecting the cannabis industry. More work needs to be done, but I see this as a big win. To critics, I say this is a significant first step.” — O’Gorman to the Journal

Newsom supported ending the cultivation tax, but in May suggested that the tax revenues would need to be replaced and supported increasing the excise tax from 15% to 19% after three years.

California’s first-quarter cannabis tax revenues were $293.5 million, a 7% drop from $316.5 million in the fourth quarter of last year, according to California Department of Tax and Fee Administration figures outlined by the Journal.

The cultivation tax revenues were used, in part, to fund youth organizations in the state but the language in the trailer bill also called for maintaining a guaranteed level of support for those groups.

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