Cannabis industry catches fire because of taxation

Growing pains – that’s probably how the California cannabis industry would describe 2021, which ended with an industry tirade on taxation.

From growers and growers to distributors and retailers, companies rallied when the California Department of Tax and Royalties announced in December it would increase taxes paid by growers because of rising inflation. The state’s cultivation tax is expected to drop from $ 9.65 to $ 10.08 per weighted dry ounce next year.

In almost the same breath, the state also announced a surplus of $ 31 billion in its budget. This coincided with cannabis traffickers who saw market prices drop, often three times less than a few years ago.

Some warned that taxes, falling prices and an illegal market would lead to the market collapse.

The near-revolt that began with a vendor pledging to withhold tax payments, with local governments such as Mendocino and Sonoma counties pledging to provide support and sympathy and California Senator Mike McGuire, D-Healdsburg , proposing a bill to transfer the amount that producers pay to the excise tax resulted in a letter sent to the governor and the state legislature. The petition calls for the abolition of the cultivation tax and a three-year holiday on the excise tax paid at checkouts as well as an expansion of retailers to sell the glut of products in the market in which big companies have squeezed small ones. farmers.

“It’s been a year that has seen agribusiness plantations come online, with 50, 80 and 100 acres,” said Aaron Selverston, co-founder and chief revenue officer of Radiant Canna, a Santa distributor. Rosa.

Selverston said these large grow operations flooded the market, causing a crash in August that pushed prices down.

“The old farmers built this industry,” he said, referring to producers with the same distinction as a master sommelier in the wine industry.

In a year that marks the 25th anniversary of the state’s approval for medical marijuana use, the fallout from the pandemic has placed dispensaries in the “essential category,” which has attracted more attention to safety and industry standards.

“The only silver lining in all of this is that the industry leaders are stepping down and telling Sacramento to do something to save this industry,” said Selverston.

Eli Melrod, CEO of Sevastopol-based dispensary group Solful, said the industry faces two challenges, one being that only about a third of the state’s local jurisdictions have a legal program in place to provide cannabis products.

“It has been a historically difficult year for small farmers. It has come to a head because of overproduction. There are people watching from the top of a cliff, ”he said. “We need to tackle taxes and we need more jurisdictions to allow it. These are two major challenges this year.

Beyond the State

Meanwhile, the federal government has made the industry think its classification of cannabis as an illegal drug may change. While that didn’t happen, states – like conservative-leaning South Dakota and Oklahoma – have seen voters give their legal consent to cannabis. About three dozen states have now signed on, legalizing cannabis for recreational and adult use at the polls.

But in an even bigger government restriction, the federal ban bans interstate commerce that would allow agriculture-rich California to sell the multitude of products now available beyond its borders.

And 2021 was not the year the US Congress passed the SAFE Banking Act to make banks feel comfortable banking with the cannabis industry. Until this is the case, cannabis operators are forced to drive with huge amounts of money because traditional banks are reluctant to open such accounts due to federal control. There are exceptions here at home. The North Bay Credit Union has created a comprehensive cannabis banking division dedicated to doing business with hundreds of suppliers to the industry.

Latham Woodward, CEO of Sense Distribution in Santa Rosa, attributes industry testing to a lack of understanding.

“I find this very offensive,” he said. Woodward cited as examples the lack of access to banking services and the government “taxing us into oblivion”.

“We are treated unequally under the law. It wouldn’t be tolerated for a minute in the wine business or a minute in the beer business, “said Woodward, calling 2021” a year of reflection “for an industry witnessing tax revolts, a call to arms. and consolidation within the supply chain.

Senior Advisor to the International Cannabis Farmers Association, Sam Rodriguez, called the year “resilience, anxiety, exhaustion, frustration and anger.” Because at the end of the day, cannabis producers – considered “the backbone of the industry” – struggle to feel that the government is on their side.

“No California farmer should consider ending their dreams. The Californian ‘dream’ as a state of mind has been suffocated by a dense fog, ”he said.

Susan Wood covers law, cannabis, manufacturing, biotechnology, energy, transportation, agriculture, and banking and finance. For 25 years, Susan worked for various publications, including the North County Times, now part of the Union Tribune in San Diego County, as well as the Tahoe Daily Tribune and Lake Tahoe News. She graduated from Fullerton College. Contact her at 530-545-8662 or [email protected]

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