The Governor’s Office today released a revised 2022-23 state budget proposal, building on the state’s ongoing work to make historic investments in California’s future, including efforts to create a safe, sustainable, and equitable legal cannabis market.
Governor Newsom delivered on his commitment to help simplify the tax structure by moving forward a proposal that, if approved by the Legislature, will remove unnecessary administrative burdens and costs, temporarily reduce the tax rate to support shifting consumers to the legal market, and stabilize the cannabis market.
We have heard from many of you who have said that the current cannabis tax framework is overly complex. We know that current tax policies disproportionately burden cannabis farmers and small businesses and create instability throughout the supply chain, ultimately undermining the societal benefits of a taxed and regulated market.
The May Revision proposes statutory changes to reform cannabis taxes and help reduce burdens for legal operators. Some changes include:
- Setting the cultivation tax rate at zero beginning July 1, 2022.
- Shifting the point of collection and remittance for excise tax from distribution to retail on January 1, 2023, maintaining a 15 percent excise tax rate.
- Setting Allocation 3 funding for youth education/intervention/
treatment, environmental restoration, and state and local law enforcement programs at a baseline of $670 million annually for three years. Up to $150 million one-time General Fund is available as needed through 2025-26 to backfill Allocation 3 funding, along with the authority to increase the excise tax rate through 2024-25 if tax revenues fall below the baseline for Allocation 3.
- Strengthening tax enforcement policies to increase tax compliance and collection and reduce unfair competition.
In addition, the Governor’s budget proposal includes a one-time allocation of $20.5 million to help expand access to legal retail throughout California. The grant program will assist cities and counties that do not currently license storefront or delivery-only cannabis retailers. If approved, the funds will aid localities with the development and implementation of local retail licensing programs and helping more of California’s existing consumers gain access to regulated and tested products through licensed and legal retailers.
You can learn more about the cannabis retail access grant proposal on page 138 in the Governor’s May Revise Budget Proposal here.
I share this information because I wanted you all to know about the work the Governor’s Office is doing to support our collective efforts. Creating a sustainable, safe, equitable, and legal cannabis market in our state is no small feat — it is a labor of love, and it takes all of us working together to help make this a reality.
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