This week, a California city lowers its sales tax on recreational cannabis to compete with the black market. Officials in Berkeley, California argue that tax-abiding marijuana dispensaries aren’t able to offer the same low pricing as black market dealers due to the state’s heavy tax program.
Details About The Tax Cut
The tax on recreational marijuana went from 10 percent to 5 percent this week. This tax reduction is only on the city-level. Including state taxes, the total tax on marijuana in Berkeley will be 30 percent. While this might seem high, it’s actually one of the lowest tax rates in the country.
California law mandates that cannabis consumers pay a city tax, sales tax, cultivation tax and state excise tax. In some places, this means a 45 percent tax on marijuana.
But even Berkeley’s lowered tax seems excessive. As marijuana shopper Robert Fracisco told CBS, “A 35% tax is pretty excessive for anything.”
Why Berkeley Lowered Their Tax On Marijuana
Legal cannabis sales in California are dwindling while the black market is experiencing a boom in business. A few months after legalization, people are less excited about legal weed and more interested in lower prices. Illegal marijuana sold online can be $20 less than what you find at a dispensary.
Fracisco explains why people aren’t buying at dispensaries as much, “The taxes I think are what’s driving people not to come to the club anymore. I know a lot of my friends who used to come to the clubs are going back to the black market.”
Marijuana Taxes Are Hurting Legal Weed Businesses
Many are concerned that these taxes cut too deep for marijuana dispensaries’ clientele. Not only does this put businesses in danger, but the state doesn’t make as much in tax dollars as expected.
In Colorado, marijuana sales top a billion dollars of taxable revenue. With a 15 percent tax rate in most places—higher in some!—Colorado has had plenty of funds to spend on education and other social endeavors.
California hoped that its 35 percent taxation would give the state the revenue it needs, but consumers are going back to black market.
Sabrina Fendrick, who works for dispensary Berkeley Patients Group, explains, “Everybody wants to generate revenue, we all want to serve our communities, but if everyone is going to the illicit market then nobody is generating revenue and nobody is being helped.”
For that reason, this California City lowers its sales tax on recreational cannabis.
Why Black Market Marijuana Abounds in California
Before you could buy recreational weed in California, we predicted that the state’s considerable cannabis tax would encourage black market sales and dissuade legal buyers.
This is due to the massive amount of weed grown in California, and the state’s strict pesticide regulations. Since many farmers don’t necessarily qualify, or can afford, a permit saying that they follow the state’s environmental regulations, they can’t sell their product at dispensaries. This means that a lot of weed has to be sold on the black market, which lowers its price.
Final Hit: California City Lowers Its Sales Tax on Recreational Cannabis
Berkeley’s decision to lower its city tax on cannabis from 10 to 5 percent is one of a few measures Californian officials are taking to combat high pricing. Currently, state officials are working on legislation that would lower the excise tax from 15 to 11 percent statewide.
Now that recreational cannabis is legal in California, let’s hope that Californian lawmakers can make it accessible.