California cannabis distributors are warning about what they call a “double-taxation” situation in San Diego that’s raising costs for businesses.
If the practice is adopted by other cities and counties, distributors note, it could contribute to further market instability in the state overall by squeezing profit margins and raising product costs for consumers.
San Diego set a formal policy in early 2018 that distributors delivering cannabis products to retailers located within the city also are liable for at least a percentage of its municipal 5% marijuana gross receipts tax – even if those distributors aren’t licensed by the city.
Distributors in other cities and counties already pay taxes to their home jurisdictions – where their actual distribution hubs are located – on wholesale flower, edibles and other MJ products.
They say San Diego’s method of taxing marijuana adds another layer of costs to the legal California cannabis industry, which is already struggling to compete with the unlicensed market.
‘Afraid this was going to happen’“Right now, you’ve got your top 10% (of the industry) that are probably doing all right, and then you’ve got the rest of us still trying to figure out how to make it,” said Chris Coulombe, the CEO of Santa Rosa-based distribution firm Pacific Expeditors. “And these taxes are not helping.”
The scenario illustrates how strict local governmental control over the California recreational marijuana industry has had ripple effects that many didn’t anticipate as the Golden State’s cannabis industry rolled out in January 2018.
“I was afraid this was going to happen, and sure enough, it has happened,” said Tim Morland, director of compliance and policy for Origin House, a Canadian firm with a massive portfolio of brands and a major California presence.
Published: April 25, 2019
Founder & Interim Editor of L.A. Cannabis News