AG says California needs to lower cannabis taxes

California’s illegal cannabis industry is booming, with billions of dollars of weed produced at illegal farms and sold at illicit pot stores every year, despite voters legalizing cannabis more than six years ago. 

That’s left one high-ranking California official calling on the state to fight the illegal market by lowering the taxes on legal pot.

Attorney General Rob Bonta said at a press conference Tuesday that the state needs to update its regulations and tax code to reduce the costs for legal businesses so they can compete against unregulated pot sales.

“The barriers to entry are too high. The costs to stay in operation are too high. And we should be lowering taxes at least temporarily for our legal cannabis businesses,” Bonta said. 

Bonta made the statement at a press conference in Fresno where he was unveiling a new initiative that he said would make it easier for the government to shut down illegal pot companies. The attorney general said fighting the thriving illegal weed market needs to be a priority for the state.

“Illegal, unlicensed cannabis activities continue, unfortunately, to flourish in California. … There is more illegal and illicit activity than there is legal activity in the state of California,” Bonta said. “… That status quo is unacceptable.”

The faltering legal pot market has left many businesses struggling to even pay their taxes. More than 260 pot stores, or about 13% of the state’s legal weed retailers, failed to pay their state excise taxes by a May 1 deadline this year, according to the California Department of Tax and Fee Administration. Those stores are now facing penalties that could put them out of business in what industry analysts are warning could be an “extinction event” with hundreds of legal pot shops failing this year.

Pot shops had a second quarter deadline to pay excise taxes on July 31, but it’s unclear how many stores were able to make the deadline. A spokesperson for the CDTFA told SFGATE the department is no longer able to release those figures because of how the state processes cannabis excise taxes.

Bonta is a longtime supporter of the cannabis industry, helping to write the 2015 law that regulated California’s medical marijuana market while he was a state lawmaker representing Oakland. He proposed a law in 2018 while he was a member of the state Assembly that would have lowered pot taxes; however, the measure failed.

California has a 15% excise tax on legal cannabis products in addition to a sales tax that starts at 7.25% but can go higher depending on local sales tax rates.