A rally was held outside the Long Beach Civic Center on Wednesday, Feb. 9 calling for lower cannabis taxes.
“Current cultivation, retail, sales and excise taxes are squeezing out the already small profit margins for everyone across the state and impacting every single license type,” said Tamika Boyce, founder of Canna-Xpress. “The taxes levied against cannabis businesses in particular are ridiculously disproportionate in comparison to every other existing business.”
The state recently raised the cultivation tax rate for cannabis 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. The cultivation tax rates for fresh cannabis plants, dried cannabis flower and dried cannabis leaves were increased by nearly 5%.
The new tax rates have increased from $9.65 to $10.08 per dry-weight ounce of cannabis flower, $2.87 to $3.00 per dry-weight ounce of cannabis leaves, and $1.35 to $1.41 per ounce of fresh cannabis plant.
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.
Cannabis business owners complained that the current taxes raise the price of their products until they can no longer compete with cheaper black market products.
“People voted because they didn’t want to see their family members go to jail,” Wonderbrett co-founder Brett Feldman said of the legalization of recreational cannabis. “They didn’t vote though to be taxed to death, they didn’t vote for legal weed to just be basically made so uncompetitive […] against the black market that there’s no chance or hope of survival for brands.”
Recreational cannabis products sold within Long Beach are currently charged an excise tax of 15% by the state and a local sales tax of 10.25% by the City.
The Long Beach City Council lowered taxes across the cannabis supply chain (manufacturers, distributors, cultivators and testing laboratories) from 6% to 1% in November 2019, but local cannabis business owners say more reductions need to be made.
According to Adam Hijazi of the Long Beach Collective Association—a group of individuals and businesses in the local cannabis industry—in 2019 there were approximately 600 jobs created by the cannabis industry in Long Beach.
Hijazi said that number rose to 1,100 in 2020, crediting this growth in the local cannabis industry to the decrease in taxes.
“Lowering tax rates makes cannabis products more affordable,” Hijazi said. “For California residents, lowering tax rates will allow the state to widen the tax base and capture more of the cannabis sales into a safe and legal market.”
Vice Mayor Rex Richardson, who attended via virtual press conference, said when the City lowered the cannabis tax rate, it also lowered its tax revenue projections for the local cannabis industry from $4.5 million to $4 million.
Despite the City’s lowered expectations, Long Beach’s cannabis industry outperformed all projections and brought in $10 million in revenue after the tax decrease.
“It was so economically viable that we’ve been able to use this additional revenue to balance our budget during the pandemic,” Richardson said. “When other revenue sources were slowing down, cannabis thrived.”
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