Members of the legal cannabis industry spoke in support of lowering cannabis taxes on Tuesday, May 10 before Long Beach City Council approved two cannabis-related items: conducting a study on the impacts of lowering the retail tax in the city and supporting state legislation that would lower cultivation taxes.
“Not only does this modernization of retail taxes help make legal cannabis products more affordable to patients and residents but also widens the tax base of residents able to purchase legal cannabis products and reduces the size of the illicit market,” said Natasha Brahmbhatt, CEO of local cultivator Hey Bud.
The Long Beach Collective Association (LBCA), a cannabis advocacy group, invited the public to attend the meeting and distributed signs to attendees that read “Make My Cannabis Affordable.”
Currently, Long Beach charges a 6% retail tax rate on cannabis purchased by someone with a medical cannabis recommendation and an 8% retail tax rate on cannabis purchased for recreational adult use.
The feasibility study will look at the potential impacts of lowering the 8% city retail tax on recreational products to 6% to match the retail tax for medical cannabis sales.
It was repeatedly mentioned by both public commenters and council members throughout the meeting that high tax rates make it hard for legal cannabis businesses to compete with the black market.
Unlicensed dispensaries have become common in nearby Compton, Wilmington and Gardena, and do not charge their customers tax. While an eighth of an ounce of cannabis may sell for $25 in Compton, in Long Beach the same amount, at a similar quality, can cost well over $45.
“I have been convinced by many folks, business owners in the industry, other folks I’m talking to at the state level, that the illicit market is destroying the industry right now,” Mayor Robert Garcia said. “And right now the illicit market and what’s happening, not just here in Long Beach but across the state, is causing incredible damage to legitimate business owners that are trying to operate their business.”
The council unanimously voted to approve the study on cannabis taxes, which will come back in 90 days. The findings of the study will be submitted to the Budget Oversight Committee before it is discussed by the Economic Development and Finance Committee.
“We can help create a more equitable business climate for legal cannabis operators in the city,” Councilmember Cindy Allen said. “Lowering the adult-use sales tax will help our local cannabis businesses expand their local workforce and provide their employees with livable wages, lower the price of cannabis products for consumers and also increase their sales—which is always good.”
The council also unanimously voted to give its support to Senate Bill 1281 and Assembly Bill 2792, which would both lower the cannabis cultivation tax in California.
Cannabis cultivation taxes are applied to any harvested cannabis that enters the commercial market, regardless of whether or not it’s eventually sold. No other crop in California is charged a cultivation tax.
The state raised the cultivation tax rate for cannabis by nearly 5% at the beginning of 2022 after adjusting it for inflation. The increased cultivation tax rate applies to all transfers and sales of cannabis made by cultivators as of Jan. 1, 2022.
“There’s no industry taxed as much as the cannabis industry,” Allen said. “And while this certainly benefits the state and local budgets, it’s just flat out unfair to the industry.”
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