California is Looking at $1B in Tax Revenue From Legal Pot

Recently the California Board of Equalization approved a proposal for funds to hire a staff to collect taxes from recreational cannabis. The Board expects it will need 114 employees as well as $20 million in funds by 2021.State analysts predict the state will see $1 billion in revenue from the production and sale of legal cannabis.

“It’s just going to be the wild, wild west out there,” Board analyst Jerome Horton told Medical Xpress.

An estimated number of 25,000 cultivators will be forced to register or operate illegally. An initial draft report predicts 114 employees. Horton called those predictions “grossly understated.” Positions that likely need to be filled include inspectors, criminal investigators and auditors.

Colorado pulled in $123 million of tax revenue during the first nine months of 2016.

Adults over 21 are permitted to possess up to an ounce of cannabis and grow up to six plants at home. A 15 percent excise tax will be applied to the retail price and provide the promised tax revenue. A separate cultivation tax will be imposed on wholesale cannabis that enters the recreational market. The combined consumer and cultivation taxes were a major selling point behind Proposition 64.

In our industry, tax payments are paid in cash, until the federal government decides to reschedule cannabis on its list of controlled substances. Only removing federal penalties will change cannabis’ tax situation.

California cannabis businesses are notorious for dodging tax requirements. “Since the marijuana excise tax and the cultivation tax represent new tax liabilities for taxpayers, prior experience shows having new taxes due results in new delinquencies from taxpayers,” the report read. It could take years for California to sort out the intricacies of recreational cannabis. The new systems are being hammered out currently as the implementation of Proposition 64 begins to takes place.