SACRAMENTO, Calif. – Legal recreational marijuana could be taxed as much as 45% in some parts of California, according to a Fitch Ratings report. The reason: Customers, retailers and growers will have to pay a combination of state and local taxes that very by municipality.
CNN Money reports consumers will pay sales taxes ranging from 22.25% to 24.25%. Local business tax will range from 1% to 20% of gross receipts, or $1 to $50 per square-foot of cannabis plants, according to the Fitch report. Adding to the mix will be a tax on farmers: $9.25 per ounce for cannabis flowers and $2.75 per ounce for leaves.
Analysts Stephen Walsh and Karen Ribble wrote, “High effective tax rates on California cannabis may complicate the state’s efforts to establish legal markets.” In other words, legal recreational marijuana could be pricey enough to keep a healthy black market operating.
California’s illicit pot industry is already well established and flourishing. Black market farmers already face obstacles to become compliant once the recreational retail market goes live on January 1. Higher taxes could keep those growers operating in the dark.
The Fitch report says Oregon has already lowered their “initially uncompetitive” tax rates to address the black market.
According to CNN Money, California could top Washington rate of 37%. Oregon’s tax rate stands at 20%, the same as Alaska.
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