California Ends Cannabis Cultivation Tax

The cultivation tax no longer applies to harvested cannabis entering the commercial market in California. Governor Gavin Newsom signed Assembly Bill 195 into law, which eliminated this tax as of July 1, 2022, as part of a $308 billion state budget.

• Distributors and manufacturers are no longer required to collect the cultivation tax from cultivators.
• Cultivators are no longer responsible for paying the cultivation tax to manufacturers or distributors when cultivators sell or transfer cannabis to another licensee.
• Any cultivation tax collected on harvested cannabis that enters the commercial market on or after July 1, 2022, must be returned to the cultivator that originally paid the cultivation tax or, if unable to be returned to the cultivator, must be paid to California Department of Tax and Fee Administration (CDTFA) as excess tax

According to Forbes, the tax of more than $161 per pound of cannabis flower will be eliminated completely and the bill, which marks a significant change to California’s tax structure for the legal marijuana industry, maintains the cannabis excise tax at its current rate of 15% for the next three years, after which the rate could be adjusted to replace revenue lost due to the elimination of the cultivation tax.