Cannabis Dispensary magazine writes
California Gov. Gavin Newsom’s proposed budget would consolidate the state’s three cannabis licensing authorities into one organization, “In an effort to improve access to licensing and simplify regulatory oversight of commercial cannabis activity,” according to a press release issued Jan. 10 by the California Bureau of Cannabis Control.
FULL PRESS RELEASE
Author: California Cannabis Licensing Authorities
To All Interested Parties,
We are proud to share Governor Newsom’s budget proposal for cannabis industry regulation and taxation, announced by the Governor today.
In an effort to improve access to licensing and simplify regulatory oversight of commercial cannabis activity, the Administration plans to consolidate the three licensing entities that are currently housed at — the Bureau of Cannabis Control, the Department of Food and Agriculture, and the Department of Public Health — into a single Department of Cannabis Control by July 2021. Establishment of a standalone department with an enforcement arm will centralize and align critical areas to build a successful legal cannabis market, by creating a single point of contact for cannabis licensees and local governments. The Administration will provide more details on this proposal in spring 2020.
Governor Newsom also proposes simplifying cannabis tax administration by changing the point of collection.
The proposed changes move the responsibility for the cultivation excise tax from the final distributor to the first, and for the retail excise tax from the distributor to the retailer. Moving the incidence of this tax to the retailer will eliminate CDTFA’s requirement to estimate product mark-up and set wholesale tax rates. The changes will reduce the tax collection burden on the cannabis industry and simplify the tax collection process.
Further, the Newsom Administration, in consultation with the industry and stakeholders, will consider other changes to the existing cannabis tax structure, including the number of taxes and tax rates to simplify the system and to support a stronger, safer legal cannabis market.
Allocation of the Cannabis Tax Fund:
Pursuant to Proposition 64, expenditures are prioritized for regulatory and administrative workload necessary to implement, administer, and enforce the Cannabis Act, followed by research and activities related to the legalization of cannabis and the past effects of its criminalization. Once these priorities have been met, the remaining funds are allocated to youth education, prevention, early intervention, and treatment; environmental protection; and public safety-related activities.
The Budget estimates $332.8 million will be available for these purposes in 2020-21, and the structure of these allocations is unchanged from 2019-20:
- Education, prevention, and treatment of youth substance use disorders and school retention—60 percent ($199.7 million).
- Clean-up, remediation, and enforcement of environmental impacts created by illegal cannabis cultivation—20 percent ($66.6 million).
- Public safety-related activities—20 percent ($66.6 million).
Chief, Bureau of Cannabis Control
Richard Parrott, Director
CalCannabis Cultivation Licensing Division
California Department of Food and Agriculture
Assistant Deputy Director
Center Environmental Health
California Department of Public Health
Cannabis Dispensary Magazine add…
That agency, along with the Department of Food and Agriculture and the Department of Public Health, is up for possible restructuring under this plan. Newsom’s proposal would pin the consolidation to a July 2021 deadline.
“Establishment of a standalone department with an enforcement arm will centralize and align critical areas to build a successful legal cannabis market, by creating a single point of contact for cannabis licensees and local governments,” Lori Ajax, chief of the Bureau of Cannabis Control, wrote Jan. 10.
More information will be coming this spring.
“This next year is going to be very critical in seeing how quickly we can course-correct and how quickly we can start to see the impacts of these changes,” Josh Drayton, spokesman for the California Cannabis Industry Association, told the Orange County Register. “We have to see who survives.”
For more than two years now, the story in California has been one of survival along razor-thin margins—both in terms of business balance sheets and economic access to the legal market. As of late 2019, the illicit market in California continued to outpace legal adult-use cannabis sales.
At the same time that Ajax announced Newsom’s consolidation plan, she noted a few other tax-related changes coming to the cannabis industry in California. The proposals include moving “the responsibility for the cultivation excise tax from the final distributor to the first [distributor], and for the retail excise tax from the distributor to the retailer.” In doing this, the Department of Tax and Fee Administration would no longer be required to estimate product mark-ups and wholesale tax rates, as it did ahead of 2020.
“The changes will reduce the tax collection burden on the cannabis industry and simplify the tax collection process,” Ajax wrote.