Tax hike next year could be 'tipping point' for legal weed industry's future: SFGate

Even more struggles could be coming for the already unstable legal cannabis industry in California.

The state's cannabis tax rate is expected to increase from 15% to 19% in July, SFGate reports, which doesn't bode well for a trade already struggling with issues like pesticide contamination.

One owner of a dispensary in Los Angeles told the outlet that this could be "the 'tipping point' that will destroy even more legal businesses," as the additional local taxes in L.A. mean the total tax on marijuana could be as high as 50%.

Jerred Kiloh, the owner of the Higher Path Dispensary in Sherman Oaks, said the high taxes have already driven many consumers onto the illegal market, where prices are lower.

“You have a very nimble demographic in the under-35 demographic that is just one Instagram post away from leaving the legal industry,” Kiloh told SFGate. 

While 2023 saw a reported $5.1 billion in cannabis sales in 2023, outstanding state tax bills alone total a quarter of that: $1.3 billion, SFGate found.

Adding to the tax struggles is the special regulation that cannabis taxes go up by 50% if they're late, as opposed to 10% for other types of businesses.

It's unclear if anything can or will be done to help the legal weed industry, but one thing is certain: The clock is ticking.