By Geoffrey Taylor, MA, Hemp Contributor, Valley Ag Voice
As the cannabis industry across the state of California is left reeling from one of the most challenging years since legalization under Proposition 64 in 2016, with record low prices for cannabis flower and biomass and the shuttering of innumerable small, family-owned family statewide, the state of California is once again placing undue hardship on those in cannabis cultivation by increasing taxes on the farmers and producers who make up the backbone of this industry.
The rate of taxation prior to January 1, 2022, for one ounce of dry-weight flower was $9.65, while leaves and trim have been taxed at $2.87 per dry-weight ounce and fresh whole cannabis plant was taxed at $1.35 per dry-weight ounce. This translated to roughly $154.40 per pound of dry cannabis flower, $45.92 per pound of dry leaves and trim material and $21.60 per pound of fresh whole cannabis plant material. Taxes have traditionally been due from cultivators before the specific material enters the marketplace, placing a huge tax burden on producers before their product is able to
“I don’t believe we’re going to be able to survive another yet in the sungrown cannabis market with the increases in taxation coupled with the low prices on our flower and trim, this year was already challenging enough,” said one Humboldt county cultivator who is joining with a group of farmers who are refusing to pay the state’s heavy tax burden in response to the tax increases, “We have to stand up in Sacramento and demand change in the way this marketplace works because it allows large, well-financed operations to absorb the hit and pass it along to consumers while smaller legacy farmers are left financially crippled as a result of over-taxation and a huge dip in market pricing.”
Beginning on January 1, 2022, farmers will see an increase to $10.08 per dry-weight ounce of cannabis flower of roughly $161.28 per pound of dry-weight flower, $3.00 per dry-weight ounce of leaves and trim material or roughly $48 per dry-weight pound of leaves and trim, and $1.41 per ounce of fresh whole cannabis plant or roughly $22.56 per dry-weight pound of fresh whole plant. While these increases sound negligible to most, this translates to major tax increases for farms who produce tons of flower and trim material and fresh frozen whole plant material for diverse needs in the marketplace.
One major industry operator, Flow Kana, based in Mendocino County, California is leading the movement against tax increases on small legacy farmers to protect the integrity of the industry and provide relief to struggling farmers from Calexico to Crescent City. CEO Michael Steinmetz wrote a compelling op-ed in the publication Medium in response to the state’s current massive tax surplus and how the increases in taxation on industry cultivators threaten to further destroy an industry that was built by these legacy farmers, particularly in the Emerald Triangle region of the state. Steinmetz and Flow Kana are leading the charge on threatening to withhold tax payments to the state until there is adequate relief to ensure struggling producers can survive the storm created by out-of-touch legislators and regulators and the impact of corporate cannabis on the industry.
For cannabis farmers and producers in the Central Valley, where most municipalities offer relatively low municipal tax rates, this will still make a large impact on their bottom lines as taxes must be paid prior to product hitting the market. Large producers like 7Points Cannabis in Woodlake, Valley Pure in Woodlake, Farmersville, Lemoore, and Lindsay, and 420 Kingdom, located in Arvin, will experience the squeeze in their operating models as taxes make a larger impact on their bottom lines, impacting both operators and employees in our region.
As the industry responds in mass to this tax increase, it’s critical to keep the pressure on regulators and legislators in Sacramento and reform the cannabis industry to open more opportunities for larger producers, as well as small, legacy producers as the cannabis industry has created over 57,000 new jobs across California following legalization in 2016.