Is California’s pot tax revenue a bust?

August 16, 2018

The state of California failed to collect even half of the marijuana tax revenue it was expecting in the first six months of 2018, signaling that much of the state’s cannabis business remains in the black market. [CBS Sacramento]

Between April and June, cultivation and excise tax revenue reached a combined level of $48 million, up from $34 million over the first three months of the year. But, state finance officials estimated California would receive $185 million in excise and cultivation tax revenue over the first six months of the year. The state only collected $82 million.

Industry workers and state officials are pointing to a variety of reasons for the low-level of pot tax revenue, including numerous local jurisdictions banning commercial pot activity or placing high taxes on it. Pot tax rates can approach 50 percent in some areas, which people in the industry say is driving business into the black market.

Assemblyman Evan Low (D-Campbell) said there is a staggering gap between the current tax revenue numbers and what voters were promised.

“Regulators must adapt before California’s lawful cannabis businesses are obliterated by the black market,” Low said.

On Tuesday, state regulators met in Los Angeles and listened to a long list of complaints and concerns about the California pot industry, including a shaky supply chain, shortage of licenses, testing problems and contested efforts to allow marijuana deliveries in jurisdictions that have banned pot sales. Lori Ajax, California’s top pot regulator, said following the hearing that the state is in a challenging transition period in which it is attempting to transform a largely illegal market into a multibillion-dollar regulated economy and there is a lot of confusion currently.