Higher Tax Rates on Cultivation May Lead to Cannabis Shortage in California

March 27, 2018, California

Within few months of legalized operations in the state, the Californian cannabis market is already experiencing a commotion. Even though enough recreational and medicinal marijuana is available, but some products are facing shortage. Moreover, newly implemented tax means prices will soon go up.

On the other hand, the black market in the state has been given a new life by the implementation of taxes and regulations. Higher taxes on cultivators and difficulties in acquiring licenses have dissuaded many businesses. If the current conditions persist any longer, retail businesses might face a shortage of locally grown cannabis soon.

Few pro-marijuana legislators who want to reduce cultivation taxes are trying to convince growers that legalized market is the best option to do business. But the grievances of local growers are not limited to high licensing fees and state taxes. Bans on different cannabis operations particularly on delivery services within the state from various local administrations is also making it difficult for legalized cannabis operations to run smoothly.

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This situation of legalized California market has also made it difficult for old businesses to operate. For instance, an MMJ dispensary that has been operational way before the blanket legalization can’t get its cannabis strains because its partner grower can’t acquire the license.

But the problem doesn’t end here. Licensed growers are selling the same amount and quality of cannabis strains at 30 to 40 percent higher prices. Some retail operations are trying to offset the impact of highly taxed cannabis by providing subsidies. It’s worth mentioning that it is not easy to offer any discount when there is a 15 percent excise tax on retail sales.

Furthermore, the transition and its impact on cultivators have also made it difficult for retail stores and dispensaries to continue some of their products. According to an operator of retail stores in Southern California, some of their products have gone offline following the legalization.

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But the state’s Cannabis Control Commission is quite satisfied with the progress of legalized market because they haven’t received any report of shortage. A spokesperson of the Manufacturers Association says that there are several large pockets in California without retail operations and strict regulations on cannabis delivery system have aggravated this problem. There are dozens of delivery drivers in the state but respective city administrations are not in the mood to regulate them.

A GOP lawmaker from Palmdale, Tom Lackey, fears that too much of taxes can culminate into a shortage of cannabis flower by summer. Therefore, he along with a fellow Democrat assemblyman has introduced a law to eradicate taxes on growers for three years and to cut retail sales tax by four percent.

It’s important to note that cannabis growers are now required to pay the levies of $44 on per pound of leaf and $148 on per pound of flower. Due to these higher tax rates, many farmers are reverting back to the black market again and some are even switching to other crops to evade all the mayhem of regulated cannabis market.

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