The California cannabis industry faces serious tax issues. The cash-strapped industry’s state tax bill has risen nearly 15% from December 2022 — when the entire industry owed California tax authorities just over a quarter billion dollars — to now just over $300 million as of mid-February. is less.
As of Feb. 16, the cannabis industry owed about $287 million, a spokesperson for the California Department of Tax and Tariff Administration said. green market report This week.
“This is based on the information taxpayers reported to us on their returns and the amount they paid us,” the spokesperson clarified in an email. “This does not include any amounts owed to the industry, but there are also no reported illegal or unregistered businesses.”
But according to Los Angeles-based cannabis consultant Avis Bulbulian, CEO of SIVA Enterprises, the actual taxes owed are likely much higher than what CDTFA is aware of. He estimates that the amount of tax owed will continue to grow, largely because many companies are not able to pay.
“Until they fix the regulatory environment, nothing is going to change. This number of taxes owed is going to increase while the growth of the industry is going to slow down,” Bulbulian said, adding that the systemic issue is “probably one of the top three topics of discussion anytime you talk to anyone who is into (cannabis) Got the business license.
Additionally, it is easier for operators to walk away from state tax bills, he said, pointing to an auction held Feb. 16 to sell assets seized from 10 cannabis companies. Those companies owed a cumulative $44 million in unpaid taxes, but they only brought in $2,075 to cover those bills.
The modest amount of the auction result is proof that policymakers need to help the industry by allowing businesses to cut costs, Bulbulian said.
“The problem is, the state has taken the approach that businesses are forced to pay what we tax them, and the reality is you might think that, but they have options. And one of those options is not to pay. The other option is to burn those licenses and get new ones,” Bulbulian said.
He stressed that many cannabis companies are profitable, but because of state industry regulations, they are often forced to spend every penny of profit to maintain compliance with those regulations.
“The bigger issue is that regulators have created a ridiculously narrow business environment where every dollar you make is either going into compliance issues, regulatory orders, taxes,” Bulbulian said.
Bulbulian said there is still a very large illicit market in California that poses a major competitive threat to the legal cannabis business, and is almost certainly cutting into profits, which in turn cuts into state tax revenues. Is. But despite ongoing enforcement efforts, the underground trade appears as strong as ever, which they argue is a policy flaw that needs to be fixed.
“The way you think about fixing this is not by targeting the black market. This is by fixing the regulated market. You fix the regulated market, you’re not going to have a black market,” Bulbulian said, arguing that California policymakers need to direct legal marijuana businesses to consumers to lower product price points and suppress illegal trade. Need to help get more retail access.
