California’s High Taxes and Black Market Threatens Recreational Sales

 In blog, News

With only three months into the start of California’s recreational marijuana market, industry leaders are voicing concerns that sales are not meeting projections due to high taxes, complicated regulations and the thriving black market. Growers and sellers are complaining that taxes are too high and many consumers are turning to the black market in order to save a buck.

Industry leaders pressed government officials at the recent California Cannabis Industry Association conference where an estimated 600 people gathered at the Sheraton Grand in Sacramento.President of the California Cannabis Industry Association and Co-founder of Kiva Confections, Kristi Knoblick, agrees that this is an industry crisis.

Government officials who spoke at the conference said they are committed to making the regulatory changes needed to help the industry achieve success. Attendees also heard from state lawmakers who are trying to make changes to the system.

Assemblyman Jim Cooper, D-Elk Grove, took shots at Weedmaps, a website that charges cannabis companies to advertise on its site, for allowing black market businesses to advertise on the platform. Cooper plans to introduce legislation this session to address illegal cannabis advertisements.

Assemblyman Tom Lackey, R-Palmdale, said another approach to combating black-market retailers is to lower taxes on legal marijuana. With tax rates as high as 45 percent, legal retailers are struggling to compete with the black market. A new bill, which Lackey co-sponsored with Rob Bonta, D-Oakland, would lower the state excise tax on marijuana from 15 to 11 percent for three years and suspend a separate tax on cannabis cultivation.

In the states with legal recreational marijuana, Oregon has the lowest tax, followed by California, Colorado, and Washington. All states except for Oregon have state and local taxes on marijuana. But other states don’t have California’s huge black market which pays no tax.

According to a report released by Arcview Market Research and BDS Analytics, California has the largest and most developed illicit market in the nation. The vast majority of the 13.5 million pounds of cannabis grown in the state annually is destined for illicit markets, either to be shipped across state lines or sold in-state illegally.

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