California sees new highs in cannabis tax revenue

Cannabis is a growing business in California and so are its tax revenues, which have never been higher.

Third-quarter numbers released Monday by the California Department of Tax and Fee Administration (CDTFA) revealed a jump in cannabis tax revenue of almost 80% compared to Q3 last year. The state pulled in a total of $306.7 million for Q3 cannabis tax revenue in 2020, coming from an excise tax of $159.8 million, a cultivation tax of $41 million and sales tax of $105.9 million. This compares to just $170.7 million for Q3 2019.

Previously reported revenue for Q2 2020 was revised to $260.2 million, which included $135 million in cannabis excise tax, $30.7 million in cultivation tax and $94.5 million in sales tax. This represents an 52% increase over last year’s $156.8 million generated in Q2.

Similarly, Q1 tax revenues of $205.9 topped 2019’s total of $129.7 million by 58%.

In 2016, California voters approved Proposition 64, the Control, Regulate, and Tax Adult Use of Marijuana Act. In 2018, two new cannabis taxes went into effect: a cultivation tax on all harvested cannabis that enters the commercial market and a 15% cannabis excise tax upon purchasers of cannabis and cannabis products.

Since January 2018, total program revenue to date is $1.81 billion and is on track to generate close to $1 billion this year alone.

Tax revenue is deposited in the California Marijuana Tax Fund, which goes to fund a variety of state and local programs, including $2 million per year to the UC San Diego Center for Medical Cannabis Research to study medical marijuana; $10 million per year for 11 years for public California universities to research and evaluate the implementation and impact of Proposition 64; $3 million annually for five years to the Department of the California Highway Patrol for developing protocols to determine whether a vehicle driver is impaired due to marijuana consumption; and $10 million, increasing each year by $10 million until settling at $50 million in 2022, for grants to local health departments and community-based nonprofits supporting job placement, mental health treatment and substance use disorder treatment.

The remaining money is allocated 60% to youth programs, including drug education, prevention, and treatment; 20% to prevent and alleviate environmental damage from illegal marijuana producers; 20% to programs designed to reduce driving under the influence of marijuana and a grant program designed to reduce negative impacts on health or safety resulting from the proposition.

Similarly in Oregon this year, receipts in the first quarter of the 2021 fiscal year, which began on July 1, were $46.9 million, 45% higher than in the first quarter of the 2020 fiscal year.