California cannabis taxes continue to plague the industry. California cannabis taxes are undoubtedly high (although not the highest in the country). The truth is that that’s not changing anytime soon.
A few weeks ago, I did an interview with KCRW where operators bemoaned the current California cannabis tax situation. Their complaints are warranted given the massive expense of owning and operating a cannabis business in the Golden State, plus the inability to take normal business deductions under IRC 280E (making the effective corporate income tax rate sky high).
The Root of the Problem
I fully understand the pain caused by California cannabis taxes. However, operators should understand that neither the Department of Cannabis Control (“DCC“) nor the California Department of Tax and Fee Administration (“CDTFA“) can do much about it on their own. Agencies do not make laws and have no power to change them. They operate within a legal boundary created by voter initiatives or state lawmakers. Under Prop. 64, California’s adult use cannabis law, it would take a 2/3 majority vote in each chamber of the Assembly to actually change the cannabis tax laws.
In other words, the tax directives here are set by statute. They are not