California may have legalized CBD, but that does not mean that it isn’t expensive. Interestingly enough, there is still a strong black market as well, perhaps due to the high prices. In an effort to thwart black market sales, a new bill has been introduced. The bill, called the Temporary Cannabis Tax Reduction Bill, proposed reducing state exercise taxes from 15% to 11% until 2022. In addition, cultivation taxes would be on the decline in the coming three years.
The bill is supported by Fiona Ma, the state’s treasurer. According to Ma, “We don’t tax start-up businesses when they start. We need to do better.” Those who support the bill do so due to the high taxes and limited access to banking, two significant issues faced by CBD businesses. Currently, CBD businesses pay 45% in taxes. The high tax rate means that they need to increase their prices in order to make a profit. In turn, the black market is much more affordable.
California is not the only state whose CBD businesses are struggling. Other states that have legalized CBD also have high tax rates. Moreover, another challenge is that the federal government still has not legalized CBD, making it a risky venture because it would be in violation of federal law.
According to Rob Botana, who discussed the bill,
“AB 286 is an important step to ensure that we protect legitimate taxpaying businesses and stop the illegal black market in California. The black market continues to undercut legal businesses that are complying with state regulations.”
Further, Troy Dayton of Arcview Group stated,
“The whole California system for adult-use legalization implementation has been a mess. California is the first state where the total retail sales went down after they transitioned to adult use because it’s so complex and the taxes are so high and everything else.”