Navigating California Regulatory Implications

Another great week in California. Compliant Cannabis Commerce is booming and everyone is becoming more comfortable and acquainted with the new requirements to conduct business.

In light of the emergency code of regulations set forth by the California Bureau of Cannabis Control Medicinal Licensed Cultivators are still able to do business with distros and manufacturers the same as Adult use licensed cultivators for the time being. This has eased tension on medicinal licensees encouraging them to apply for their Adult Use licenses and fall in line with the new legal markets.

Licensees are now getting used to the new tax structures although they feel it’s very high and unfair. The taxes are so high in fact there is very little margin left for the cultivators. Especially on trim, the going market rate on trim currently is around $125 a lb. with a $44 cultivation tax levied on each pound. This means on sale of a 100 lbs. of trim, $8100 would go to the cultivator and $4400 goes to the government. This also does not take in to account that an additional 15% excise tax is applied at the retail level to final products.

The implications of this are going to result in even lower prices and margins for cultivators as we move into croptober and the markets are flooded with fresh supply. There will be natural downward price pressure on the cultivators as they will be competing to liquidate their products. Naturally the manufacturers and distributes will be capitalizing on this. This is the exact same trend we have witnessed in Washington State first hand as farms continue to tool up and expand their canopies.

Overtaxing encourages continued black market activity, many cultivators have their entire livelihoods on the line and will resort to whatever means necessary to survive. By overtaxing the government is shooting itself in the foot, defeating their own purpose and actually losing money weather they realize it or not. A fair tax structure needs to be imposed or black market activity will rise and more cannabis will be exported from California all over the US and the World where it still fetches a premium price.

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