California Governor Annual Budget Proposal Could Simplify the Life for Marijuana Business

January/16/2020

Marijuana businesses in California could soon start enjoying better proceeds through the proposed regulatory and tax collection system. 

It could also be an indication that this year, more legislative help would be accorded to the struggling legal marijuana market in California. 

On January 10, California Governor Gavin Newson announced his annual budget proposal and said that he wants to;

• Combine three regulatory agencies into one by July 2021. These agencies include the Bureau of Cannabis Control (BCC), the Department of Food and Agriculture (FDA), and the Department of Cannabis Control (DCC).
• Restructure cannabis tax collection system

Industry stakeholders are in favor of both proposals; however, since the budget is yet to be approved by the state legislators, a lot of details remain unannounced.

Communications chief for the California Cannabis Industry Association (CCIA) Josh Drayton said that when talking about the budget proposal, there are more unknowns than the knowns. But he noted there is a possibility that both plans will be definite for the legal market.

Drayton further noted the merging of the three agencies would be a huge shift as it will unify three agencies’ powers under one unit, the DCC.

The Bureau of Cannabis Control duties includes overseeing the retailers, delivery services, distributors, microbusinesses, events, and testing laboratories. While marijuana manufacturers oversight is the responsibility of the Department of Public Health and the Department of Food and Agriculture regulates the growers.

 When the proposed DCC is approved and operational, it will be the lead regulator for every licensed marijuana business within the state of California.

Drayton further said that since the market for legal recreational marijuana was launched in California, one of the major problems has been contradictory messages from the state authorities to marijuana companies that are trying to adhere to the rules, particularly vertically integrated firms that have business licenses from more than one agency.

Drayton also added that the proposed revamp of the tax collection system would simplify the life of the state revenue collection protocol more than that of the cannabis industry. But with the governor’s support, there is the likelihood of lower marijuana taxes.

Drayton further said that the outbreak of the Vaping-related illness in 2019, was a wake-up call as many legislators realized the severity of the black market products concerning the general public health. This might have contributed to the argument of lowering marijuana taxes to attract marijuana customers to the legal market.

During a budget news conference held last week, Gov. Newsom said that his team is open to receiving more input about marijuana tax reform as well as the possibility of lowering the taxes, which showed that they are willing to review the entire tax process, said Drayton.

Drayton further anticipates that last year’s attempt by Assembly Member Rob Bonta to reduce state excise tax from 15% to 11% and suspension of the cultivation tax till 2022 may be revived. 

If the proposed changed to the law are approved, they will be effective as soon as 1st July.