Motley Fool reports..
California’s cannabis sales limp out of the gate
The crown jewel of legalizations for the pot industry was that of California in the November 2016 election. Prop 64 in California passed by a wide margin, with 57% of voters in favor of allowing recreational cannabis to be sold. Considering that California recently surpassed the U.K. to become the fifth-largest economy in the world, and given its more progressive nature, expectations have been high that marijuana sales would rocket out of the gate. However, they’ve done no such thing.
According to a press release from the California Department of Tax and Fee Administration, tax revenue from the cannabis industry hit just $60.9 million during the first quarter of 2018 (sales began on Jan. 1, 2018). This included a $1.6 million in cultivation tax revenue (made up of a $9.25-per-ounce tax on dried cannabis flower, and $2.75-per-ounce tax on cannabis leaves), $32 million in excise tax revenue (a 15% tax on the retail price of the product), and $27.3 million from existing state and local sales tax.
Following the release of this data, the state’s independent Legislative Analyst’s Office (LAO) lowered its forecast for excise-tax collection in 2018-2019 — i.e., the state’s first full fiscal year of operations, which begins July 1, 2018. The LAO reduced California’s expected full-year excise tax haul to $630 million between July 1, 2018, and June 30, 2019, down from a previous projection of about $643 million.
This New Frontier info-graphic is worth taking a look at too
- In January, California’s draft budget anticipated $175 million in total cannabis cultivation and retail taxes by June 30.
- For Q1-2018 the state collected cannabis taxes totaling $33.6 million (19.2% of the six-month forecast).
- New Frontier Data’s revised projections foresee $1.12 billion in medical cannabis and $805 million in adult use, for total cannabis sales of $1.92 billion in 2018.
- By 2025 we project $4.72 billion in sales, made up of $760 million in medical and adult-use sales of $3.96 billion.
- To revise our numbers, our analysts first revisited our patient count. We initially assumed just under a million patients were visiting medical dispensaries, but significantly reduced that count to 400,000 after speaking with operators in the field.
- Our analysts also stretched out our timeline for how quickly illicit users are converting to the legal market.
- In this week’s blog, New Frontier Data’s Associate Director of Industry Analytics Kacey Morrissey goes more in depth into how our latest modeling methodology reflects California’s revisions.