California cannabis tax revenue dips in early 2022; North Coast firms blame the lower receipts on regulation

Reflecting industry tension with regulators and the general economy, California saw first quarter tax cannabis tax revenues drop compared to the last quarter of 2021.

2022 first quarter total returns amounted to $293.5 million for the period collected as of May 17 (while taking into account late returns for the period ending March 31), the California Department of Tax and Fee Administration (CDTFA) reported. The $293.5 million contrasts with $316.5 million taken in for the fourth quarter in 2021, a 7% decline.

Breaking down the $293.5 million, tax revenue from excise taxes was $156.3 million, while sales taxes were $105.5 million. Both of those are charged when products are sold. The tax levied on growers yielded $32.6 million. Those figures also showed drops in comparison to the first and last quarters of 2021, the state tax agency reported May 26.

Since the state began taxing cannabis in January 2018, tax revenue to date has brought in $3.76 billion.

That became a point of contention for cannabis operators late last year when tax rates went up at a time the industry faced unprecedented challenges. A glut in product, especially as mega farms flourished, led to a plummet in the wholesale price. Meanwhile, the illicit market thrived by undercutting the legal businesses, industry insiders contend. The threat of market collapse caused a tax revolt, with about half the growers opting to fallow their grounds until conditions change.

“We’re not surprised by this (tax revenue drop) because right now the legal industry is so heavily taxed and regulated it makes it impossible to be profitable in this market with this tax structure,” said Kaleena Quarles, general manager for the Abide dispensary in Napa. [Read more at The Press Democrat]