July 5, 2022

California’s AB 195 has passed the Legislature and is headed to Governor Gavin Newsom’s office, where it is expected to be signed into law. Of particular interest to California cultivators, the Bill will do away with the much-maligned cultivation tax. California’s cultivation tax is, for the moment, a flat tax by weight, with separate levies for flower, leaves, and fresh plants. As the tax was weight-based, it remained constant even as prices in the state’s legal market have cratered from a year ago, further pinching the bottom lines of growers already under pressure from oversupply and falling prices.

Assuming the bill is signed into law, the California Department of Tax and Fee Administration, in cooperation with the the Department of Finance, is tasked with “adjusting the [retail] excise tax by a percentage that will generate an amount of revenue that would have been collected pursuant to the cultivation tax imposed prior to its discontinuation under the bill, as specified, except that the bill would prohibit the cannabis tax rate from exceeding 19% of the gross receipts of the sale.” In short, every May, the retail excise tax will be adjusted to make up for the shortfall from canceling the cultivation tax. For now and through at least the first half of 2023, the retail excise tax will remain at the current rate of 15%. The complete “trailer bill” is located here.

Lost Coast Outpost writes about demand for high quality flower from “some of the largest buyers in the state,” but sees a “major shift” in the California cannabis market. Specifically, the biggest buyers are demanding product with specifications that many smaller farms are not able to meet. Increasingly discerning wholesale and retail buyers are leaving small growing operations out of the market altogether.

The opinion piece is likely a hard pill to swallow for many. It delineates the failings of Emerald Triangle farmers convinced they produce “killer stuff” based largely on notions they developed while growing in and for the illicit market. The writer sees demand moving away from (mostly) small growers whose “livelihood was based not on skill but on the fact that there was relatively little weed around.” The article notes that corporate cannabis is here to stay and only the smaller growers who are skilled and fast on their feet will survive the current industry shakeout.

Cannabis companies are sponsoring local initiatives to overturn historic beach town opt-outs as enshrined in Proposition 64. Capital Public Radio writes about the efforts by Catalyst Cannabis to get local control on upcoming ballots in towns along the California coast. Catalyst has met with some success, but the company’s methods have rubbed some local governments the wrong way. The company plans on taking their voter initiative plan to ten more towns where cannabis is prohibited by Prop 64’s local option.