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Can Cannabis Tax Cuts Save OC’s Mom-and-Pop Pot Shops?

Soon with fewer taxes?

The last time I was in Washington state, I had the pleasure of enjoying craft beer at a brewery that was downstairs from a marijuana dispensary. While chatting up the owner of both sitting across the bar, she mentioned that were it not for the profits from the brewery, she could not afford to keep the dispensary open.

It seemed so counter-intuitive to a clueless consumer such as myself. After all, you pay a lot less for a beer buzz than you do for a pot buzz (although you need a lot more of the first than you do the latter).

The problem, the owner said, was that she pays out so much in fees and taxes to operate the dispensary that it is impossible for small-timers such as herself to actually make any money. And she was already seeing what this had led to: Big companies swallowing up little ones and creating chains, a phenomenon we in the print news industry call “our death.”

In California, life support for dispensaries was introduced Monday by State Treasurer Fiona Ma and Assembly members Rob Bonta (D-Alameda),  Reggie Jones-Sawyer (D-South Los Angeles) and Tom Lackey (R-Glendale).

Their Assembly Bill 286, known as the Temporary Cannabis Tax Reduction bill, would cut the state excise tax on cannabis sales from 15 percent to 11 percent and suspend the $148-per-pound cultivation tax altogether through 2022.

Why? Because since California began licensing canna-businesses, the number of permits have fallen short of expectations, causing the marijuana tax revenue forecast to be scaled back from $630 million to $355 million. California’s legal weed market of about $2.5 billion in 2018 was half a billion dollars less than it was in 2017, according to sales tracking company GreenEdge.

The fear now is would-be proprietors are shying away from opening dispensaries because of all the fees and taxes they face, especially the mom-and-pop startups. Keep in mind that in addition to the cannabis taxes AB 286 would temporarily cut or suspend, dispensaries are on the hook for the regular state and local taxes any other business pays.

“We are helping legal cannabis businesses with their transition into the marketplace, just like we would for any startup industry,” Ma said in announcing AB 286.

While revenues have been lower than expected for legal dispensaries, demand for product has remained unchanged, which means a black market continues to thrive in California, something legalized weed was supposed to prevent.

“The black market continues to undercut businesses that are complying with state regulations and doing things the right way,” Bonta says in the statement from Ma’s office. “AB 286 will temporarily reduce the tax burden on these licensed operators to keep customers at licensed businesses and help ensure the regulated market survives and thrives. This very strategy has been shown to actually increase overall tax revenue in other states.”

Click here to read the legislation.

Another impediment to doing canna-business is the very limited access to banking services. Because marijuana remains on Schedule 1 of the federal Controlled Substances Act (just like heroin!), accepting deposits from dispensaries can be deemed money laundering and, since the feds see such transactions as illegal, they cannot be FDIC insured. But banks are required to insure all of their depository accounts.

To Read The Rest Of This Article By Matt Coker on OC Weekly

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Published: January 29, 2019

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