Wednesday, November 14, 2018

Marijuana generating more in tax revenue, but still less than expected

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California is collecting more tax revenue from legal marijuana, as more businesses get licensed during the first year of regulated sales, but the numbers are still well below initial projections according to third quarter sales tax figures.

In all, the state collected $93.1 million in taxes from cannabis businesses during the third quarter, the California Department of Tax and Fee Administration reported this week. That included $52.4 million in excise taxes and $12 million in cultivation taxes on all cannabis, plus $28.7 million in sales taxes on recreational marijuana.

While that’s up nearly 53 percent from the first quarter of the year, when California took in $60.9 million in revenue after new taxes kicked in and recreational sales started Jan. 1, it’s well below first-year projections made by the state prior to legalization.

“I do think it’s a very good sign that the revenue is increasing,” said Josh Drayton, spokesman for the California Cannabis Industry Association.

“As we’re closing out 2018, the market is stabilizing.”

Experts say it’s been a tough transitional year for legal cannabis in California, plus most cities in the state still ban the industry entirely.

When voters approved Proposition 64, economists predicted the state would take in around $1 billion each year in marijuana tax revenue once the regulated market was fully up and running.

Even if the industry posts a strong fourth quarter, with continued growth and a boost in sales around the holidays, it doesn’t look like California will crack $500 million in legal returns this year.

Gov. Jerry Brown budgeted for the state to take in $185 million in excise and cultivation taxes over the first six months of the year. California missed that mark by more than $100 million, with $80.6 million in excise and cultivation taxes during the first two quarters.

Brown’s budget projects $630 million in marijuana tax earnings during the 2018-19 fiscal year that started July 1. To hit that mark, the state should average $157.5 million each quarter.

In the first quarter of this fiscal year, revenues from marijuana excise and cultivation taxes hit $64.4 million.

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Just over a third of California cities and counties permit cannabis businesses in their borders, according to a database of local policies compiled by Southern California News Group.

“The local bans and local municipalities that have not moved forward with regulating the industry are absolutely the biggest barrier to entry,” Drayton said.

With a shift in state and local administration following the midterm elections, and with education about the industry continuing, Drayton hopes to see more cities welcome commercial cannabis in 2019. And that, he said, will keep driving tax revenues closer to projections.


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