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As California prepares to raise marijuana tax, a top cannabis CEO calls for tax revolt

Fresh off of news that California is set to raise the cannabis cultivation tax despite projections of a $31 billion surplus, one marijuana entrepreneur is calling for a potential tax revolt this summer.

Michael “Mikey” Steinmetz, co-founder of the company that makes the Flow Kana cannabis brand, is threatening to withhold his taxes unless Gov. Gavin Newsom and the Legislature adjust state marijuana regulations July 1, 2022. He is calling on other CEOs to join him in this effort.

Steinmetz issued the declaration in an op-ed on Medium, published Monday. He criticized the California Department of Tax and Fee Administration’s plans to increase the cultivation tax this January, writing “We simply reply: We’re not going to pay.”

Retail marijuana is taxed three times in California: an excise tax paid by buyers, sales tax paid by customers and the cultivation tax that growers pay. Growers want changes to the cultivation tax because they pay it before they make a sale. California’s current cannabis cultivation tax is $9.65 per dry weight ounce for cannabis flower, $2.87 per dry weight ounce for leaves and $1.35 per dry weight ounce for cannabis plants. That will increase to $10.08 for flower, $3 for leaves and $1.41 for plants beginning Jan. 1. [Read More @ Sacramento Bee]

 

This Post Has 5 Comments
  1. This is a great first step but this action must be coordinated with legislative and administrative lobbying. Reach out to your legislators to urge them to work against this plan. The economics and the business challenges of cannabis are still greatly misunderstood by members of the legislature. They see it as a source of easy tax revenue without understanding that these additional taxes and onerous regulations make it far less likely that the industry will succeed. Find your power and overturn these taxes and create more reasonable regulation.

  2. It’s called the war on drugs for a reason. The exposure you’ve had is minimal. You honestly have no right to complain. Pay your fees to the man they only accept cash. Your worthless security notes mean nothing when Uncle Sammie wants his tender. Fruitlessly spending grandma and grandpa’s retirement money so you can play in an industry for greed. You are not respecting the plant we love. It’s our plant mikey. I think that is clear with legal sales at 25% of an industry worth billions.

    I will make a suggestion to you wall street barrons. If you wanna stabilize the industry offer 10k square feet and below growers 1,000 a pound for full sun outdoor then scale up for DEP and indoor. Direct pricing is your only way outta the mess you created. The virtical integration strategy is a failure we exploit daily on every Main Street in every state across the U.S.A. Respect those that have suffered the most creating this industry after all, it’s their plant.

  3. I am in full agreement with a voter initiative to equal the cannabis tax to alcohol. The voter initiative can work better then the lobbyist route. I have no faith in the lobbyist route, too many fingers in the pie to get it reduced to equal to alcohol.

    Let the people decide how much harm to society alcohol vs cannabis and the cost of that harm to our emergency services.

    You have to have your head in the sand if you think the high taxes are not increasing the black market. Why would I want to go to the store and pay 30% tax when I can buy from my friend for less. Steve, start a non-profit so I can send you $$$ to get signatures on the ballot. You have entire support industry to supply the $$$ needed.Just look at MJ Biz con exhibitors list for the $$$ to push this through.

  4. I agree whole-heartedly. The state has absolutely massacred the entire legal cannabis space. I am the CEO of a relatively small manufacturing and distribution company that owns several brands. In the nearly 3 years we have been operating in this space, I have lost MILLIONS, affecting my actual life/family/financial stability.

    There was no grandfathering of people that operated in the prop 215 space. All of us essentially needed to restart our business. California has done what it always done, over reach and tax things to death. I could go on but have ranted with all the emails to the regulators to no avail.

    It is clear they have absolutely zero concept of the economics of this industry. In the prop 215 days there were over 6,000 retail shops. Now there are less than 1,000 operating, yet the number of cultivators, manufacturers, and distributor increases almost daily. This creates (shocker) an extreme supply/demand imbalance and causes prices to plummet.

    Meanwhile the illicit market continues to thrive relatively unfettered. If the regulators had ANY clue they would take a longer term view and: greatly reduce the overhead of operating (METRC IS TERRIBLE), eliminate ALL taxes and SUBSIDIZE the operators for a period of 3-5 years. Making the legal market less expensive than the illicit will make a massive dent in the illicit supply.

    Additionally, The regulators also have ZERO accountability. Their delays in making decisions, allowing every city/county be a ‘special snowflake’ with regard to retail outlets, and the evaporating margins caused by over-taxation and gross over-supply SHOULD all be actionable grounds.

    Yes withhold the taxes but also sue to make the changes. I would be up for a good ole fashioned class action. How much has the general incompetence of the various regulators cost your business? Taxes are also supposed to support the thing being taxed. It is criminal to have the tax levels where they are and have so little support for what was and hopefully will one day again be a thriving market.

    1. Thanks for sharing your views and ideas Jason. The Socialist state of California has by design lost the war on the illicit market so they can continue to build state government payrolls…I’d love to live there but not if I have to give my hard earned money to state and local governments who perpetuate their jobs and income while providing very little incentive for legitimate businesses to locate to the “Golden Government state”. Sorry that you and your family are being severely hurt by this charade.

      California not only needs a cannabis tax revolt, but an entire revamp of its regulatory system. None of the politically elected or appointed officials would survive for 10 minutes in the private sector.

      CBE Press.

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