California marijuana retail CEO calls for cannabis tax revolt

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Marijuana grows at the Ohana Gardens Collective, a medical cannabis cultivation and delivery company, in 2017.

Sacramento Bee File

Freshly informed that California is set to increase tax on cannabis cultivation despite projections of a $ 31 billion surplus, a marijuana entrepreneur is calling for a potential tax revolt this summer.

Michael “Mikey” Steinmetz, co-founder of the company that makes cannabis brand Flow Kana, threatens to withhold taxes unless Governor Gavin Newsom and the legislature adjust state marijuana regulations on the 1st. July 2022. He calls on other CEOs to join him in this effort.

Steinmetz published the statement in an op-ed on Medium, published Monday and co-authored by his wife, Flavia Cassani. He criticized the California Department of Tax and Fee Administration’s plans to increase the cultivation tax in January, writing “We just say we’re not going to pay.”

Retail marijuana is taxed four times in California: state and local excise tax paid by buyers, sales tax paid by customers, and cultivation tax paid by growers. Producers want changes to the cultivation tax because they pay it before they make a sale.

The current California tax on cannabis cultivation is $ 9.65 per ounce dry weight for cannabis flowers, $ 2.87 per ounce dry weight for leaves, and $ 1.35 per ounce dry weight for cannabis plants. This will drop to $ 10.08 for flowers, $ 3 for leaves, and $ 1.41 for plants as of January 1.

The rate hike “reflects as an adjustment for inflation, as required by the cannabis tax law,” according to the department.

The proposed increase has been condemned by cannabis advocates, including California NORML, whose director Dale Gieringer said in a statement: “The legal sector is already so plagued by excessive taxes and regulation that it cannot compete with unlicensed traders. California must reduce, not increase, cannabis taxes to make the legal market more competitive. ”

What Flow Kana wants

In his editorial, Steinmetz calls for the elimination of the cultivation tax and the state granting a three-year tax exemption for the excise tax on cannabis.

California revenue from marijuana taxes is skyrocketing, up 26% from last year. California collected $ 333 million in total cannabis taxes in the second quarter of 2021, up from $ 264 million in the same period last year, according to the California Department of Tax and Fee Administration.

Steinmetz also wants the state to overturn the local control provision of Proposition 64 – the 2016 voting initiative that legalized adult cannabis in the state – which allows cities and counties to decide for themselves whether ” whether or not to allow marijuana operations in their jurisdictions.

“There is a real path that can be followed and real change can be achieved. The solution to these problems and the possibility of saving this industry are in the hands of Governor Newsom. We call on him to save the California cannabis industry so that we can restore our California to its position as a world leader in cannabis, ”Steinmetz wrote in his editorial.

In an interview with The Bee, Steinmetz said his proposed tax revolt was a last resort. He said he was ready to work with Newsom and state lawmakers to craft legislation – which he said would require a two-thirds vote in both the State Assembly and the Senate of the state – to implement the reforms it proposes.

“We can literally do it legally, do it right, and do it together,” Steinmetz said.

If the state takes no action, Steinmetz wrote in his editorial that he would place the proceeds of his estimated cultivation tax in an escrow account until action is taken.

Local control

Steinmetz’s proposal comes as cities and counties in California have taken a disparate approach to legalization within the state. According to Hirsh Jain of Ananda Strategy, out of 482 cities in California, only 174 allow any type of licensed cannabis business in their jurisdiction. Only 115 of them have licensed retail stores within the city limits.

In his editorial, Steinmetz wrote that the idea of ​​local control backfired, with Californians unable to purchase cannabis from a dispensary in 68% of the state.

“The only way to solve this problem is to bypass local control and trust the majority of Californian citizens, who voted to legalize cannabis and want this industry to flourish,” Steinmetz wrote in his editorial. .

This proposal is likely to face an uphill battle with the League of California Cities, which has argued that ensuring local decision-making regarding cannabis is a key part of Proposition 64.

“In fact, to gain further support for the measure, the authors changed the original language to include the explicit right of cities and counties to ban marijuana-related businesses altogether if they so choose. So if a city or county refuses to allow cannabis companies in their jurisdiction, that is very much in line with what voters approved when they legalized cannabis for adult use in 2016, ”the said. League representative Elisa Arcidiacono in a press release.

Arcidiacono said his organization supports the rights of cities to determine locally what’s best for them, and said forcing them to accept cannabis stores against their will would challenge what Californians voted for in 2016.

Steinmetz admitted that what he is proposing is unorthodox.

“In life, it takes crazy people to do crazy things,” he said.

Steinmetz said he does not approach this issue as a revolutionary, but as a problem solver. He said he didn’t want to fight with the state, but was ready to do whatever he felt was necessary to implement the change.

“This is a white flag that we are raising that will turn red by July 1,” said Steinmetz.

This story was originally published 23 November 2021 5:00 a.m.

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Andrew Sheeler covers California’s unique political climate for the Sacramento Bee. He covered crime and politics from the interior of Alaska to the oil fields of North Dakota to the rugged coast of southern Oregon. He attended the University of Alaska Fairbanks.


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