California state marijuana excise tax could go up July 1

California state marijuana excise tax could go up July 1

Although the California marijuana industry has hoped for tax relief as it struggles to compete with a thriving illicit market, a tax increase could be on the way.

A tax hike would hit cannabis companies’ bottom line and could drive more consumers into the illicit market in search of cheaper marijuana products.

But an increase isn’t a foregone conclusion. Moreover, a tax cut could occur.

The California Department of Tax and Fee Administration (CDTFA) uses a 60% markup rate, along with the average market price of wholesale marijuana, as a basis for the state’s 15% marijuana excise tax.

That markup rate has to be recalculated every six months, and CDTFA Director Nicolas Maduros told an industry conference this week in Sacramento the excise tax may go up this summer.

“We’re responsible for resetting that markup rate every six months, so it will be reset July 1,” Maduros said, when asked during a panel with other MJ regulators.

“It’s based on market data, and I think particularly once …track-and-traceis more fully utilized, that we’ll have some better pricing data to figure out what that markup rate should be,” Maduros said.

The state track-and-trace system launched in January but is only used by cannabis companies with annual business licenses.

And so far just a fraction of the legal companies have obtained those permits, which means most of the industry isn’t feeding data into the track-and-trace system.

“We’re administrators, so it’s not up to us to sort of use that as a way to lower or increase the tax burden. We’re simply looking at what the facts are. It’s up to the legislature … to determine what the actual tax rate is,” he said.

When asked if the markup rate – and therefore the excise tax – could increase, Maduros said: “It could.”

It’s worth noting, however, that the rate also could either decrease or stay the same.

A CDTFA spokesman said in an email that there’s also no cap on how much the markup rate could increase – or decrease.

What a markup could mean

Maduros said after the panel that any decision on the markup rate and the excise tax will not be made until June at the earliest.

The markup recalculation would not affect the state cultivation tax, which is $9.25 per ounce of flower, $2.75 per ounce of leaves and $1.29 per ounce of fresh plant.

California Cannabis Industry Association Spokesman Josh Drayton said that a tax increase “would only further damage the supply chain as it competes against the illicit market.”

But, Drayton emphasized, it’s possible the excise tax may either stay the same or even decrease, and said it’s too early to tell what will happen with the CDTFA’s recalculation.

“I think we need full implementation of Metrc and track-and-trace before we consider any increase,” Drayton said.

“We have not seen any data that would support an increase in the excise tax for any part of the supply chain.”

Separately, a state bill to temporarily reduce state cannabis taxes is awaiting hearings in the California Legislature.

If successful, Assembly Bill 286 would reduce the excise tax from 15% to 11% and suspend the cultivation tax until 2022.

California only made half as much on 2018 marijuana taxes as expected

When California, the most populous state in America, legalized recreational marijuana last year, many had high hopes for the industry, writes Joseph Misulonas. But unfortunately, it appears initial projections for the success of the industry were a little off.

The California Department of Tax and Fee Administration announced that in 2018 the state collected $345.2 million from marijuana taxes. While that is a huge number, it's actually only slightly more than half of the state's initial projections of $643 million in tax revenue that they predicted they would receive in 2018. 

Many have argued why the state didn't make more money off of legal sales. The biggest reason seems to be the tax rate. California has some of the highest cannabis taxes in the nation, and customers can sometimes pay tax rates up to 45 percent on their marijuana purchases. These high prices are forcing many cannabis users to continue purchasing black market marijuana. This would also explain why California cannabis sales actually decreased between 2017 and 2018, despite it being legal recreationally last year.

Despite the fact that almost everyone acknowledges the tax rate is an issue, California legislators continue dragging their feet on the issue and not passing bills to lower the rate, despite several proposals to do so.

The US Government Is Asking For Citizens’ Opinions on Marijuana Laws

The US government is asking for citizens’ opinions on marijuana laws. And thousands are responding.

Yes, 4/20 is just around the corner. But before the festivities commence, consider sharing your thoughts about marijuana laws with the federal government, which is inviting “interested persons” to submit public comments on the issue up until April 23. As of Wednesday, more than 5,000 people already have… on the official record, at least.

Even that number—large as it may seem—is a bit misleading. It comes from a government website. The misinformation made it difficult for advocacy organizations to submit comments from supporters. Even using their own third-party submission outlets. NORML, which created one such tool, has received almost 10,000 additional comments. The comments will be printed and hand-delivered to the FDA. You can expect them before the April 23 deadline, Justin Strekal, NORML political director, told High Times.

Why Does the Federal Government Care About Your Weed Opinion All of a Sudden?

The comment period is managed by the Food and Drug Administration (FDA). It was opened in an effort to gauge public sentiment about the legal status of marijuana. THC, CBD, and other cannabis compounds were also covered. The comment period was followed by a World Health Organization-led review of international laws on those substances.

You might remember that the federal agency opened a similar comment period last year to get a sense of Americans’ thoughts about CBD.

But this is a bit different. The FDA wants input on whether marijuana itself—not just CBD—should be reclassified under international treaties that mandate strict prohibition among member countries, including the United States. If the World Health Organization loosens the rules on marijuana’s legal status, that could be a serious game changer.

Your Comments Matter. Here’s Why.

According to a summary of the request, the FDA wants “comments concerning abuse potential, actual abuse, medical usefulness, trafficking, and the impact of scheduling changes on availability for medical use of five drug substances.”

“These comments will be considered in preparing a response from the United States to the World Health Organization (WHO) regarding the abuse liability and diversion of these drugs. WHO will use this information to consider whether to recommend that certain international restrictions be placed on these drugs.”

In other words, your comments could help inform the country’s position on international marijuana laws. The very laws that have perpetuated prohibition around the world.

How Are People Responding So Far?

It’s no secret that polling shows growing, majority support for marijuana legalization in the U.S. A quick glance at the public comments submitted so far clearly reflects that belief.

The Washington Post’s Christopher Ingraham tweeted Wednesday, after reviewing the first 50 of the more than 5,000 public comments, that “every single one of them was in support of rescheduling or legalizing marijuana.”

Final Hit: The US Government Is Asking For Citizens’ Opinions on Marijuana Laws

“It’s incredibly important that everyday Americans make their voices heard,” Strekal told us. “One of the reasons why America has the potential to be great is through an active and engaged citizenry—and at the end of the day, democracy is not supposed to be a spectator sport.”

“The process that we’re going through right now is merely a procedural process for the FDA to go through in order to compile their report back to the WHO regarding the exact scheduling of cannabis under international treaties,” he said.

“This is not even in regard to U.S. policy. This is a comment period for international policy—and the ramifications that that international policy has on providing cover for prohibitionist lawmakers and their sympathizer lawmakers to not reform our laws.”

Man Fired For Smoking Weed Gets His Job Back With Bonus Compensation

The question of how employers will handle drug tests grows more complicated as cannabis becomes legal in more places. This is especially true in Canada right now, as full legalization is on the immediate horizon. Most recently, as a man fired for smoking weed gets his job back with bonus compensation in Thunder Bay, Ontario, many of these questions are coming into better focus.

Weed Smoker Gets His Job Back

In October 2017, two workers at Bombardier Transportation were fired after a supervisor said he saw them smoking weed at work. More specifically, the supervisor said he saw the men taking their afternoon break outdoors. He said he smelled a strong odor of marijuana coming from their direction and saw smoke.

Further, the supervisor said that when he approached the men, he saw one of them toss something to the ground. The object smoldered and then went out. However, the supervisor was unable to find anything when he searched the ground.

Despite not finding any physical evidence, the supervisor brought the two men to Human Resources. Throughout the entire incident, the two men insisted that they hadn’t been smoking weed. They also said that they would probably fail a drug test since they smoked at home on their own time. Regardless, the company fired both men.

Now, a few months later, one of the men has been reinstated. His co-worker’s case is still ongoing. But for the man who got his job back, things have worked out pretty well.

The arbitrator handling his case said that Bombardier Transportation did not have just cause to fire him. As a result, the company was required to give him his job back with no loss of seniority. Additionally, the company had to compensate the man for lost income during his months of unemployment.

“He was not seen smoking, exhaling, or disposing of drugs or paraphernalia,” arbitrator Paul Craven told TB News Watch. “The company has not demonstrated that it is more probable that the grievor smoked marijuana on its property on October 5 than he did not.”

Final Hit: Man Fired For Smoking Weed Gets His Job Back With Bonus Compensation

Along with citing lack of evidence, Craven also brought up the issue of Canada’s pending legalization. Similarly, he cited concerns with drug testing protocols. In particular, Craven said that drug tests do not accurately determine whether or not a person is impaired at the time the test is administered.

“It has become notorious that current tests for cannabinoids are incapable of demonstrating either present impairment or recent consumption,” he said. He added that companies like Bombardier “might well consider other more reliable methods of assessing impairment and/or alternative policy approaches to the problem of marijuana use in the workplace.”

Ultimately, this case also highlights questions about employment and legal weed. Canada is preparing for federal legalization, which is scheduled to occur sometime this summer. In the age of legalization, many have wondered if it makes sense to allow companies to screen employees or potential employees for marijuana use. This particular case suggests that policy could be moving toward protecting cannabis users.

Massachusetts Begins Cannabis Retail Licensing Process

More than a year after legalizing recreational marijuana, Massachusetts begins cannabis retail licensing process today. The state Cannabis Control Commission will be accepting applications for cannabis business licenses in anticipation of legal retail sales later this year. Massachusetts voters legalized recreational pot in 2016.

Activists and regulators alike are enthusiastic about the opening of the permit process. Lester Grinspoon is a former professor of psychiatry at Harvard. He has been a leader in the struggle for legal cannabis in Massachusetts since the 1970s. And at 89 years old, he wasn’t sure he’d be around to see it.

“I speculated this could happen, but I never dreamed that I would live to see it. It certainly is gratifying,” Grinspoon told the Boston Globe.

The progress also pleased Steve Hoffman, the chairman of the cannabis commission.

“It’s an exciting step. It’s starting to become real,” he said.

State Taking Applications In Three Phases

The Cannabis Control Commission will be accepting applications for cannabis business permits in three phases. The first phase includes existing medical marijuana dispensaries and companies known as “economic empowerment applicants.” These are businesses who employ, benefit, or are owned by members of communities disproportionally affected by the War on Drugs.

Jim Borghesani is a spokesman for Regulate Mass, an activist group working to have cannabis regulated like alcohol in Massachusetts. He told local media the state is giving these companies priority in an attempt to address and compensate for past inequities in enforcement.

“A lot of these are urban areas where people were adversely impacted by prohibition because of the disproportionate number of arrests for people of color compared with people who are Caucasian,” Borghesani said.

The commission will begin accepting applications for the first phase on April 16.

Cultivators and certain small business can then submit applications beginning May 1. Manufacturers, distributors, and retail stores can apply for their licenses starting on June 1.

Regulators expect that retail cannabis sales will begin in Massachusetts sometime after July 1.

It isn’t easy for a company to successfully navigate the state’s cannabis application process. Strict regulations require applicants to submit a minutely detailed operations plan.

“You have to show a good business plan, a level of security that’s acceptable to the Cannabis Control Commission, making sure there’s no diversion of product into the black market,” said Borghesani.

The process isn’t cheap, either. Applicants must pay $500 just to submit their paperwork. The licenses themselves run from $3,000 to $10,000 each. Borghesani added that cannabis business usually can not take advantage of traditional modes of financing.

“It’s a problem because it’s still illegal at the federal level, and banks are worried about losing their federal charter,” he said.

Final Hit: Massachusetts Begins Cannabis Retail Licensing Process

Some applicants have already begun t0 prepare for the application process, despite all the red tape. Norton Arbelzaez is the director of government affairs for New England Treatment Access. His company operates a growing operation in Franklin, Massachusetts and medical marijuana dispensaries in Brookline and Northampton. The firm has already prepared its application, he reports.

“We’ve got our incorporating documents, financial statements, operating agreements — all that stuff — ready to go,” he said.

A Vacant Elementary School Could Soon Be A Marijuana Grow Operation

A vacant elementary school could soon be a marijuana grow operation. It seems a Michigan school district is reconsidering selling one of its school buildings to a marijuana firm. The buyer hopes to turn the facility into a medical marijuana cultivation site.

School Board Not Keen on Recreational Marijuana

The East Jackson School district has not always been keen on doing business with the cannabis industry. In fact, the original offer made by the Dromos Group of Waterford expired last year.

But the district’s Board of Education is now on the verge of accepting the company’s offer of $900,000. The details of the Bertha Robinson Elementary School transaction will be hashed out later this week, reports MLive.

The school district was originally concerned that their dealings with marijuana might be a bad influence on the students. Board members were accepting of the idea of using the school to grow medical marijuana. But that’s where the liberal attitude stopped.

School officials expressed apprehension at first. They wanted nothing to do with marijuana sales. That’s something they have not been willing to give in on since the beginning. East Jackson Superintendent Steve Doerr told local reporters, “What’s only legal today, may not be in the future.”

“The board has to do what’s best for East Jackson students and the community,” he added.

No Retail Marijuana Sales Permitted

It turns out that a little finagling in the purchase agreement was all that was necessary. The cannabis company has agreed not to grow marijuana for recreational use.

As part of the deed restrictions, the property can only for growing and processing medical marijuana. The rules will apply for the duration of the deed.

“This locks in this use now and forever, regardless of changes in legislation or ordinances or owners,” Doerr said. “No sale or dispensing of marijuana—medical or otherwise—will be allowed there ever.”

Final Hit: A Vacant Elementary School Could Soon Be A Marijuana Grow Operation

Michigan legalized marijuana for medicinal purposes back in 2008. Since then, advocates have been working to end prohibition altogether. A recent survey shows Michigan residents are in favor of this reform. Almost 57 percent of the population believes marijuana should be taxed and regulated in a manner similar to beer. It is likely that the state could vote on this issue later this year.

No matter what happens with the state’s marijuana laws, Bertha Robinson Elementary School is forever a grow-only territory. Maybe they’ll even grow organic marijuana.

The sale will be final before the end of the week.