California scraps hashish cultivation tax

California has voted to scrap the state’s cannabis cultivation tax in a bid to kickstart the industry. The bill was signed into law by Governor Gavin Newsom after receiving broad bipartisan support in both houses.

As well as eliminating the tax, set at US$161 on a pound of buds, it maintains the cannabis excise tax at its current rate of 15% for the next three years. After that, though, it could be increased to replace lost revenue. 

California Governor Gavin Newsom (photo: Gage Skidmore)

The bill will help growers who have seen wholesale prices fall by around 50% while the cultivation tax rate remained stable. 

Executive director of the California Cannabis Industry Association (CCIA) Lindsay Robinson welcomed the move, but said more needs to be done to support the sector.

“Eliminating the cultivation tax is only one step towards stabilising our industry, but it is an important step,” she said. 

“Stability in the cannabis supply chain creates much-needed government jobs and tax revenue while protecting public health and safety and keeping cannabis out of the reach of children.”

The measure also creates new tax credits for certain businesses, shifts the responsibility for collecting the excise tax from distributors to retailers, and reduces the number of workers a company can employ to 10 before triggering the requirement to create a labour agreement and, potentially, the unionisation of its workforce.

A $10,000 tax credit will be available for social equity cannabis businesses approved under programs aimed at ensuring representation of underserved communities and people harmed by prohibition. Social equity retailers will also be able to keep 20% of the excise duty they collect for three years.