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Experts Say Illicit Cannabis Market Will Benefit From California Tax Hikes

California has some of the steepest cannabis taxes in the country ー but there’s no relief in sight for struggling businesses.

The California Department of Tax and Fee Administration (CDTFA) announced last week the markup rate on California cannabis will increase come Jan. 1, sparking an outcry from the legal cannabis industry which has struggled to push back against challenges like onerous regulations, slow adult-use cannabis adoption, and a robust illicit market.

“This is a huge problem because the black market outnumbers the legalized market. And the price is just increasing exponentially. Obviously, this is going to be challenging for a lot of dispensaries and cannabis operators to compete. And if they can’t compete, they go out of business,” said William Bogot, co-chair of Fox Rothschild’s cannabis law practice group.

CDTFA, which is required to reassess the markup rate for excise taxes every six months, announced last week the rate will jump from 60 percent to 80 percent next year. The agency also announced inflation-based cultivation taxes, assessed once per year, will jump about 4 percent for flower, leaves, and fresh cannabis plants.

The California Cannabis Industry Association, a leading trade organization, said the move left its members “stunned and outraged.”

To Read The Rest Of This Article By Chloe Aiello on Cheddar

Published: November 26, 2019

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