California Cuts State Taxes on Cannabis Growth and Cultivation
- Jul 19, 2022
Operating in one of country’s largest cannabis markets, California-based growers are now able to put some money back in their pockets. As of July 1, 2022, California Governor Gavin Newsom, as part of Assembly Bill No. 195, is ending the cultivation tax for harvested cannabis entering the state’s market.
With an annual tax revenue nearing $1.3 billion in 2021, the highest of any state, California had previously taxed cannabis production and sales at three different levels. Licensed business owners are required to pay cultivation taxes and state and local excise taxes, as well as state and local sales taxes.
Under the cultivation tax, all cannabis flowers and leaves were taxed at both $9.25 and $2.75 per dry-weight ounce, respectively. Cultivators were required to pay the tax to licensed distributors and manufacturers when selling or transferring cannabis. Under the new bill, this has been effectively eliminated.
The primary goal of ending the cultivation tax is to help compliant growers and legal cannabis-based businesses stay competitive with unlicensed and illicit operations, which currently owe the state over $200 million in unpaid taxes.
All cultivation taxes collected on cannabis products after July 1, 2022, will be returned to the cultivators who originally paid it.
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Eric Altstadter CPA is an Audit Partner and Chair of the firm's Cannabis and Hemp practice with over 30 years of experience working with public companies and privately held businesses
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