California’s marijuana industry is sounding the alarm over a looming tax hike, but state officials say the increase is moving forward regardless.
The California Department of Tax and Fee Administration has confirmed that the state’s cannabis excise tax rate will rise from 15% to 19% on July 1. The 26% increase is the maximum allowed under current law and was announced Thursday during a cannabis advisory committee meeting.
The tax hike was triggered automatically due to a decline in cannabis excise revenue. Industry leaders blame the drop on mounting taxes, persistent competition from the illicit market, and costly regulatory burdens that have forced many licensed businesses to shut their doors.
Amy O’Gorman Jenkins, executive director of the California Cannabis Operators Association, warned that licensed operators may not survive the new tax burden. “We’re urging the Legislature and Administration to act quickly and freeze the tax at 15%. If we want a regulated market to survive in California, the time to intervene is now,” she said in a statement.
In response, Assembly Member Matt Haney introduced AB 564 earlier this year to lock the cannabis excise tax at 15%, prohibiting future increases. The measure passed the Assembly Business and Professions Committee on April 22 and now heads to the Assembly Revenue and Taxation Committee.
Rami Kassis, general manager of Mission Cannabis Club in San Francisco, said the latest increase threatens to push legal businesses over the edge. “With the upcoming tax hike, we anticipate a decline in consumer spending, particularly reflected in a drop in average basket size – a trend consistently observed in previous years following similar tax increases,” he said.
