August 31, 2021

California’s Legal Market Continues to See Strong Sales Growth

The California Department of Tax and Fee Administration (CDTFA) recently issued data on taxable sales and cannabis tax collections for Q2 2021. Additionally, Q1 2021’s figures were updated and completed after many businesses took advantage of an extension to remit granted by the state in light of the coronavirus. Overall, the data shows retail sales growth continued to be strong, while the amount of wholesale supply entering the licensed system in Q2 did not expand quite as much as retail demand.

Taxable sales for Q2 2021 reached almost $1.36 billion, up by over 11% from Q1 2021’s taxable sales of $1.22 billion. Q2 2021’s taxable sales were up by 24.5% year-on-year.

Total California Cannabis Tax Receipts Surge 26% Year on Year

Total taxes collected in Q2 2021 were $333 million representing a 9.3% increase quarter-on-quarter and a 26% increase in total cannabis tax revenue year-on-year. The expansive quarterly gains seen through the first pandemic period last year have tapered off in 2021, which may be due in part to people returning to work and having less leisure time. Additionally, the rather sharp 21.9% drop in the wholesale flower price observed by Cannabis Benchmarks from November 2020 – January 2021 may also have played a role in slowing sales and tax revenue growth.

In 2021, however, excise tax receipts began a slow climb that coincided with a gradual recovery in price, with January to June price climbing 15.3%. California’s 15% excise tax is levied on retailers and is calculated based on the wholesale price paid, plus a markup rate set by CDTFA, in the case of bilateral trades between two unaffiliated parties.