Local bans on marijuana companies in California are helping the illegal market flourish and the state and municipalities are exempt from tax revenues that could help offset economic losses caused by the coronavirus pandemic, according to a new study.
The report analyzes the financial impact of the 75 per cent of cities and counties that have implemented cannabis bans despite the 2016 statewide vote to legalize the plant for adult use.
“Inconsistencies between various jurisdictions, particularly with tax rates, licensing procedures, and land use regulations” have created a situation in which “the illegal market continues to account for a large majority of cannabis sales in California,” it concludes.
The analysis shows that while there is a strong demand and potential for revenue, California lags far behind other legal states due to the widespread local ban.
“By benchmarking California’s legal performance of cannabis sales against other states that have legalized cannabis sales recreation, the state is generally not doing well,” it says, noting that “California’s taxable cannabis tax per capita $ 51.77 in 2019 is less than half of per capita sales in Washington, Oregon and Colorado. ”
Via ADE.
The analysis – conducted by the financial consulting firm Applied Development Economics and commissioned by the California Hispanic Chambers of Commerce and Weedmaps (which, by full disclosure, has long been a sponsor of Marijuana Moment) – used three jurisdictions. with changing marijuana regulations underscoring the potential for local tax revenue that comes with allowing cannabis businesses. Those areas are Stockton, San Bruno, and unincorporated Sacramento County.
Stockton, which just last year developed a licensing system and imposed a five percent local tax on marijuana sales, could generate anywhere from $ 824,500 net to $ 3.9 million a year in revenue if it approved enough retailers to satisfy question.
Via ADE.
San Bruno is “an untapped cannabis market with no existing cannabis retailers operating within the city limits,” the note reports. While the city council approved a measure to put a proposed 10 percent sales tax on cannabis on the November vote, it has yet to implement licensing regulations.
Via ADE.
The analysis estimates that, if voters approve the initiative passed by the council and allow businesses to operate in the city, “local tax potential for the city of San Bruno will range from about $ 235,300 to $ 1.1 million.”
The unincorporated areas of Sacramento County provide the most restrictive example in the report. While some local jurisdictions, including the city of Sacramento, allow cannabis companies and levy local taxes, the province itself has and has no plans in the works to set up a licensing system.
Via ADE.
Given the rough range for demand, analysts said that if the province of Sacramento adopted a tax rate of four percent, it would generate anywhere from $ 1.2 million to $ 5.8 million per year.
“Based on our independent and objective analysis, cannabis companies show a lot of market potential for additional legal sales throughout California,” the report concludes. “This would result in substantial increases in taxes for state and local governments as the number of retail cannabis establishments expands to meet local demand in those communities that do not currently have legal retail cannabis sales.”
“Because of the underperforming cannabis market in the state, the supply of potential market support has increased significantly. Market demand already exists, with most of the demand currently being met through illegal sales channels that do not generate tax revenue. While local governments struggle to meet their budget needs and provide essential services to their residents, legal cannabis sales represent a source of revenue that has not been utilized by most California jurisdictions. ”
Julian Canete, CEO of Hispanic Chambers of Commerce in California, said in a press release that local bans on marijuana companies “have hampered opportunities for cannabis entrepreneurs since nearly California voters passed Prop 64.”
“In the wake of COVID-19, there has never been a better time for local governments to embrace the potential for more tax revenues that fund critical services, and we hope this study encourages many to consider their opposition. , “he said.
Read the full study of California’s cannabis market below:
ADE Cannabis Report by Marijuana Moment on Scribd
New initiative to legalize marijuana sales in DC filed
Photo courtesy of Philip Steffan.
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