In California, cannabis is legal to grow and farm. However, the state historically has imposed extra taxes on cannabis farmers to raise more money for the state budget. They have to pay a variety of different taxes, and the combination can make it impossible to earn a profit. This year, some of those taxes are being reduced.
Lawmakers in CA, as well as other states, have looked to cannabis as a new source of tax revenue. It is politically popular to tax the growth and sale of the plant, but that can sometimes lead to tax rates so high that the growers have to close. In California, growers need to pay a 15 percent state tax, plus local taxes that can add on up to 30 percent more. On top of that, the state has an additional cultivation tax of $161.28 per dry pound of product.
In recent years, prices for cannabis have dropped so low that tax rates have driven growers out of business. The cultivation tax alone has, over time, become a large percentage of the cost of cannabis, something that wasn’t the case too long ago. The governor recently offered some tax relief by removing the cultivation tax entirely. This leaves growers with a little more breathing room and the ability to earn a profit.
While recently cannabis has been heavily taxed, the lower prices for wholesale product has led the CA government to pare back on some of those taxes to ensure that growers still make enough money to continue their business without having to close due to lack of profit on their sales.