The State of California is boasting a $31 billion surplus, yet announced plans on Nov. 17 to raise taxes on cannabis cultivators in the state… again. In response, Flow Cannabis Co. founders Michael Steinmetz and Flavia Cassani wrote a piece explaining why their company has no plans to comply with the new rate.
“We applaud recent reforms that resulted in a surplus,” reads a Medium piece signed by Steinmetz, “To the cannabis tax raise, we simply reply: we’re not going to pay.”
A shrinking market
According to MJBizDaily, flower taxes per ounce are increasing from $9.65 to $10.08, leaves are going from $2.87 to $3 and fresh cannabis plant material will see an increase from $1.35 to $1.41. Taxes hit “different parts of the supply chain,” according to Steinmetz and Cassani, making regulated cannabis approximately 50 per cent more expensive to produce than unregulated cannabis.
Few incentives to play by the rules
Since 2017, Flow Cannabis Co.’s retail partner numbers have decreased from 800 to 350, and now they only regularly service about 150. A growing number of retailers have defaulted or are on a payment plan because it’s “impossible” to operate profitably in the current regulatory climate. The result? Layoffs and a contracting market due to an increase in unregulated players, a lack of retailers, too much flower and high taxes, they write.
“By eliminating the cultivation tax, and allowing a three-year grace period for excise tax, we can give oxygen to the supply chain, which ultimately lowers the price point on the shelf and makes legal products more competitive with the illicit ones, which in turn grows the tax base,” they write.
Sixty-eight per cent of the state doesn’t allow regulated cannabis retail, sometimes due to a lack of local resources to create a regulatory framework — another boon for unregulated cannabis, argue Steinmetz and Cassani.
“The only way to fix this is overriding local control and trusting the majority of California citizens, who voted in favor of cannabis legalization, and wish to see this industry thrive.”