California Recreational Marijuana Sales Tax Could Soar to 45% in Areas

California Marijuana Dispensary

In 2016, 56% of voters in California approved Prop 64 to legalize recreational marijuana in January 2018. The state’s marijuana market is projected to be the largest in the U.S. and see around $1 billion per year in marijuana tax revenue.

While taxes help the state, the huge tax rates being proposed on marijuana sales might force Californians to continue buying marijuana from the black market instead of at state-licensed dispensaries, reports. Some Californians could be paying over 40% in taxes per marijuana purchase, which puts the market in jeopardy before it even gets started.

Breakdown of expected taxes:

  • Cultivators must pay $9.25 per ounce of flower or $2.75 per ounce of leaves, plus a 15% excise tax on final products
  • 61 municipalities have adopted local business taxes ranging from 7.75% – 9.75%
  • All taxes additional to the state sales tax of 7.5%

A Fitch Ratings report said, “High tax rates raise prices in legal markets, reinforcing the price advantage of black markets.”

Some say that California should use Canada as an example, where the government is proposing a tax of $1 per gram.