After four years of exhaustive efforts, California leaders eliminated the cultivation tax along with other changes, providing some bit of respite for cultivators. But does the plan just move money around, and is it even close to enough to save struggling farmers?
California Governor Gavin Newsom released his 2022-2023 revised budget on May 13—most notably containing the much-needed tax cuts. On June 29, Assembly Bill No. 195 passed in the Senate by 34-0, and the California Assembly voted 66-0 in favor of the bill. The bill took effect immediately following the signature of Newsom, providing the legal cannabis industry some much-needed temporary tax relief, which began July 1.
The state’s cultivation tax at over $161 per pound was scrapped and money was reallocated: Cannabis excise rate will remain at 15% for three fiscal years—but may be increased after July 1, 2025. Equity licensees will be able to retain 20% of the excise taxes they collect to reinvest into their businesses. They will also be eligible for a $10,000 tax credit. It also includes $40 million in tax credits, of which $20 million will go towards tax credits for storefront retail and microbusinesses, and $20 million for cannabis equity operators. The bill allows qualified businesses to claim tax credits of up to $250,000 for qualified expenditures beginning in the 2023 taxable year. It also adds additional enforcement tools against the illicit cannabis market.
Hardly a Long-Term Solution
Doug Chloupek, CEO and founder of Juva Life, faced many of these tax woes as a manufacturing permit holder in California. When Newsom proposed his revised budget back in May, Chloupek said the cannabis cultivation tax cuts failed to fix several key problems. Keep an eye on those