The Cannabis Cultivation Tax in California: Breaking it Down
Authors: Simon Menkes, Rachel Wright, and Abraham Finberg (Licensed CPA’s in California)
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California Cannabis Tax Increase and the New Revolt
California’s cannabis cultivation tax is set to go up again, and one leading cannabis business owner is staging a revolt.
On January 1, 2022, the tax on flower will be rising from $9.65 to $10.08 per dry-weight ounce, while the tax on leaves is increasing from $2.87 to $3.00 per dry-weight ounce, and the tax on fresh plant from $1.35 to $1.41 per ounce.[1]
In an op-ed piece on the respected website Medium.com[2], the owner of Flow Cannabis Co. (Flow Kana), Michael Steinmetz, sited a broken cannabis market and cannabis taxing system in California and threatened civil disobedience if Governor Gavin Newsom didn’t take action to fix it.
“We are … making the recommendation to our board that we refrain from paying the cultivation tax after July 1st, 2022,” writes Steinmetz. “Our recommendation will be to place our estimated tax in escrow in good faith, and to withhold payment until we see real, actionable change. We invite our fellow California operators to join us.”
Steinmetz called for “less taxes and more retail,” asking the Governor to eliminate the cultivation tax and allow a three-year grace period for excise tax, enabling legal products and cannabis businesses to compete fairly with the huge illegal market.
Steinmetz is also calling on California to override local control of the issuance of licenses. 68% of the state’s cities don’t allow cannabis businesses to operate, thereby handing over those markets to the illegal cannabis operators.
“Our company is just one of many that has grown accustomed to operating in perpetual survival mode as we collectively wait for an injection of lifesaving regulatory and legislative changes to simply have a system that works,” Steinmetz states. “This is our story. This is our demand.”
As CPA’s in the industry since 2009, we have seen first-hand the challenges our clients face as tax paying citizens. While tax compliance is vital, we know the difficulties such compliance can create for a cannabis business owner in today’s perplexing regulatory environment. We get it and are here to help you navigate the ever-changing and difficult tax landscape.
[1] https://www.cdtfa.ca.gov/taxes-and-fees/tax-rates-stfd.htm
[2] https://medium.com/@gretchen_49385?p=e2af11ff9bd8
Disclaimer: This article has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice.
