California marijuana retail CEO calls for cannabis tax revolt

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Marijuana grows at Ohana Gardens Collective, a medical cannabis cultivation and supply company, in 2017.

Marijuana grows at Ohana Gardens Collective, a medical cannabis cultivation and supply company, in 2017.

Sacramento Bee File

A marijuana entrepreneur is calling for a possible tax revolt this summer following news that California will hike cannabis cultivation tax despite projections of a $ 31 billion surplus.

Michael “Mikey” Steinmetz, co-founder of the company that makes the cannabis brand Flow Kana, threatens to withhold his taxes unless Governor Gavin Newsom and the legislature adjust the state’s marijuana regulations on July 1, 2022. He urges other CEOs to join him in this endeavor.

Steinmetz issued the statement in a comment posted on Medium on Monday. Criticizing the California Tax and Fees Authority’s plans to increase the cultivation tax in January of this year, he wrote, “We just answer: We won’t pay.”

Retail marijuana is taxed three times in California: an excise tax paid by buyers, a sales tax paid by customers, and the cultivation tax paid by growers. Growers want crop tax changes because they pay them before making a sale.

The California cannabis growing tax is currently $ 9.65 per ounce dry weight for cannabis flowers, $ 2.87 per ounce dry weight for leaves, and $ 1.35 per ounce dry weight for cannabis plants. That increases to $ 10.08 for flowers, $ 3 for leaves, and $ 1.41 for plants starting January 1st.

The increased rates “are reflected as an inflation adjustment under the Cannabis Tax Act,” the ministry said.

The proposed increase has been condemned by cannabis advocates, including California-based NORML, whose director Dale Gieringer said in a statement: “The legal industry is already so burdened with excessive taxes and regulation that it cannot compete with unlicensed marketers. California needs to cut cannabis taxes, not increase them, to make the legal market more competitive. ”

What Flow Kana wants

In his comment, Steinmetz calls for the abolition of the cultivation tax and a three-year tax exemption from the state for the cannabis consumption tax.

California’s marijuana tax revenue is skyrocketing, 26% more than last year. California collected a total of $ 333 million in cannabis taxes in the second quarter of 2021, up from $ 264 million in the same period last year, according to the California Department of Tax and Fee Administration.

Steinmetz also wants the state to repeal the local control provision of Proposition 64 – the 2016 election initiative that legalized adult cannabis use in the state – which allows cities and counties to choose for themselves whether to allow marijuana operations within their jurisdictions .

“There is a real path to follow and real change can be achieved. The solution to these problems, and the ability to save this industry, rests in the hands of Governor Newsom. We urge him to save the California cannabis industry so that we can restore California to its global cannabis leadership position, “Steinmetz wrote in his comment.

In an interview with The Bee, Steinmetz said his planned tax revolt was the last resort. He said he was ready to work with Newsom and state lawmakers to draft laws – which he believed would require a two-thirds majority in both the state assembly and state senate – to implement the reforms he proposed.

“We can literally do it legally, do it right and do it together,” said Steinmetz.

Should the state not intervene, Steinmetz wrote in his comment that he would deposit his estimated income from the cultivation tax into an escrow account until action is taken.

Local control

Steinmetz’s suggestion comes because California cities and counties have adopted a patchwork approach to legalization within the state. According to Jain Hirsh of Ananda Strategy, of 482 California cities, only 174 allow any type of licensed cannabis business within their jurisdiction. Only 115 of them have licensed retail stores within the city limits.

In his comment, Steinmetz wrote that the idea of ​​local control backfired as Californians couldn’t buy cannabis from a pharmacy in 68% of the state.

“The only way to fix this is to override local scrutiny and trust the majority of California citizens who have voted for cannabis legalization and who want the industry to thrive,” Steinmetz wrote in his Comment.

That proposal is likely to face an uphill battle with the League of California Cities, which has argued that ensuring local cannabis decision-making was an important part of Proposition 64.

To gain additional support for the measure, the authors changed the original language to include the express right of cities and counties to ban marijuana-related businesses entirely if they so chose. So if a city or county refuses to license cannabis companies in its jurisdiction, that is fully in line with what voters approved when legalizing adult cannabis in 2016, ”League representative Alisa Arcidiacono said in one Explanation.

Arcidiacono said their organization supports cities’ right to determine locally what is best for them.

Steinmetz admitted that what he is proposing is unorthodox.

“Life takes crazy people to do crazy things,” he said.

Steinmetz said he did not approach this issue as a revolutionary, but as a problem solver. He said he did not want a fight with the state, but that he was ready to do what he felt was necessary to bring about change.

“We are hoisting a white flag that will turn red by July 1st,” said Steinmetz.

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Andrew Sheeler reports on California’s unique political climate for the Sacramento Bee. He has covered crime and politics from Alaska to the North Dakota oil field to the rugged coast of southern Oregon. He attended the University of Alaska Fairbanks.