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California Drops Cannabis Cultivation Tax

By Leo Bear-McGuinness

Published: Jul 04, 2022   
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Cannabis companies in California will no longer have to pay a cultivation tax.

On June 30, California Governor Gavin Newsom signed an extensive bill that included a renewed cannabis budget, known as AB 195.

Under AB 195, the cultivation tax on growers has been eliminated and the cannabis excise tax at point sale has been capped at 15% for three years.

The change has largely been welcomed by the state’s cannabis growers, many of whom have complained about the high financial burden cultivation tax placed on their businesses.

“AB 195 […] will reduce tax burdens on legal cannabis businesses, simplify tax collection and bolster enforcement against unlicensed operators,” Amy O’Gorman Jenkins, a legal cannabis lobbyist living in California, tweeted on June 30.

The tax earned California’s state departments $32.68 million over the first three months of this year alone. The excise tax brought in $156.36 million and a sales tax generated $104.50 million in the same period.  

The AB 195 bill also allows eligible social equity retailers to keep a percentage of the excise tax they collect and enables such licensees to receive new tax credits if they demonstrate strong labor standards.

“Among many things, this bill invests millions of dollars into equity operators and retailers and expanding retail access, and contains reforms that will help stabilize the cannabis market, provide relief to farmers, incentivize stronger labor standards and crack down on the illegal market,” Nicole Elliot, director of California’s Department of Cannabis Control, said in a statement. 


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