California's Cannabis Tax Cuts: A Lifeline for Struggling Businesses

In a move signaling relief for the cannabis industry, several cities and counties in California have taken steps to cut taxes on cannabis businesses. Berkeley, for instance, has passed legislation that temporarily exempts both medical and recreational cannabis businesses from the collection of industry-specific taxes. This exemption, effective from January 2023 to July 2025, aims to keep legal cannabis businesses alive and curb illicit activities.

The state of California has also reported significant tax revenue from cannabis sales. In the first quarter of 2023, the state generated over $216 million, although this is a slight dip from the $248.5 million collected in the last quarter of 2022. Since January 2018, legal cannabis sales have generated nearly $5 billion in tax revenue for the state.

Adding to the relief measures, the cultivation tax, which had been a significant burden for smaller cannabis companies, was completely dropped in July 2022. This move received broad bipartisan support and has been welcomed by growers who argued that the tax was stifling the industry.

Furthermore, a new Cannabis Equity Tax Credit (CETC) is now available for qualified cannabis businesses. This tax credit, applicable from January 1, 2023, through December 31, 2027, offers a $10,000 credit to businesses that have received approval for the fee waiver and deferral program administered by the California Department of Cannabis Control.

While the state collects its share of taxes, it's important to note that many cities and counties have their own additional fees and taxes, collected at the local level. This layered taxation system adds another dimension to the financial landscape that cannabis businesses must navigate.

In summary, these tax cuts and credits are a lifeline for struggling cannabis businesses in California, making it a more attractive market for both existing and potential operators.