Explained

How much will cannabis cost under California’s legal marijuana taxes?

cannabis taxes

(AP Photo/Ed Andrieski)

Legal cannabis buyers in California will pay about eight dollars more for their usual $50 eighth-ounce of top-shelf flowers, under California’s new marijuana taxes which begin Jan. 1, 2018.

Whether you’re buying recreational or medicinal cannabis, the exact final price depends on your store’s local sales taxes and whether it raises prices to match new costs in the supply chain. Here’s a projection for the final tab on $50 eighth-ounce of flowers at popular dispensaries.

A $50 eighth-ounce of the strain Star Dawg from Torrey Holistics in San Diego:
TODAY
$50 pre-tax base price
$3.88 state and local sales tax @ 7.75 percent
$53.88 total

Versus 2018
$50 pre-tax base price
$3.88 state and local sales tax @ 7.75 percent
($6.90 state excise tax at 15 percent)
($1.15 state cultivation tax)
$61.93 total (projected total)

So here’s the first complication. You see the state excise and cultivation taxes? They are not “pass-through” taxes. That means you won’t see them reflected as line items on your sales receipts. But in our projections, we highlight them in parentheses.

So, for example, a $50 eighth-ounce of Green Ribbon from Harborside in Oakland:
TODAY
$50 pre-tax base price
$4.63 state and local sales tax @ 9.25 percent
$54.63 total

Versus 2018
$50 pre-tax unit base price
$4.63 state and local sales tax @ 9.25 percent
($2.50 Oakland excise tax @ 5 percent)
($6.90 state excise tax)
($1.15 state cultivation tax)
$65.18 total (projected total)

And a $50 eighth-ounce of Wedding Cake from Northstar Holistic in Sacramento:
TODAY
$45.98 pre-tax base unit price
$3.79 state and local sales tax @ 8.25 percent
23 cents local use tax @ 0.5%
$50 total

Versus 2018
$45.98 base unit price
$3.79 state and local sales tax @ 8.25 percent
23 cents local use tax @ 0.5%
($6.90 state excise tax)
($1.15 state cultivation tax)
$58.05 (projected total)

Layers of Taxes

The ratings agency Fitch estimates that, when you add up the multiple layers of taxes, prices could go up 45 percent in some parts of the state starting Jan. 1.

California could collect up to $1 billion per year in cannabis tax revenue, but “it’s going to be kind of messy in the beginning,” said Fiona Ma, a member of the state Board of Equalization, which collected medical cannabis permit fees and taxes until July 2017.

“This is a huge undertaking,” she said. “Trying to rush it all in a two-year process is a daunting task.”

The state may reconsider its tax rates in the near future, said David McPherson, compliance director at HDL Companies, a cannabis management services consultancy.

“I think the issue really is where stabilization begins,” McPherson said. “It’s like when we first got computers: They were $4,000 and three years later they were $400. We anticipate it’s going to take 18 months to tell us where we really are and how much we’re over-taxed.”

Return to reading the California cannabis legalization launch guide main page