While the Golden State is globally known for its weed culture among other things, little do people know about the struggles that California growers have faced trying to keep that culture alive. Luckily, the industry is about to receive financial relief, but many growers have been wiped out from the industry already.
A Financial Nightmare for Growers
If you want to be a part of the cannabis industry you have to bootstrap a lot more cash than other businesses starting out. To even enter the industry is hard since you must deal with several different taxes and financial barriers. For instance, if a business is flower-touching, it cannot apply for business loans because the businesses aren’t federally legal. Flower-touching means businesses that deal with the cultivation or growing on the supply chain.
Aside from no help from the bank, growers also deal with excise taxes of almost 40% along with a hefty cultivation tax; taxing businesses $161.28/dry-weight pound or more depending on the local jurisdictions. Before the fall of 2021 growers could withstand the taxes with the price of wholesale outdoor flower being sold for $1,500/lb. Then, the price collapsed 275%, to as low as $400/lb. As a result, many businesses couldn’t make a profit and ultimately had to close their doors or scrape by.
Cultivation Tax Relief
While in January 2021, Governor Newsom signaled his plans for relief, growers continued to bleed money. During this time, several protests by growers and concerned citizens raised awareness of the issue. Then, on July 1, 2022, Governor Newsom proposed a way to provide financial relief to those struggling businesses: slashing the cultivation tax to $0.
Additionally, according to The National Law Review, the proposal would “also shift the point of collection and remittance of the 15% state-wide excise tax from distributors to retailers, update allocations of the Cannabis Tax Fund, and establish a local jurisdiction retail grant access program to aid localities with the development and implementation of local retail licensing programs.” Finally, on May 13, 2022, the governor officially slashed the cultivation tax and provided much-needed relief to the remaining growers of the industry.