In California, the end of prohibition (i.e., the legalization of recreational marijuana) has brought with it a great many changes, including substantial taxes to be imposed on the sale of marijuana. Dispensaries in the state must take care to ensure that they are in compliance with the necessary regulations so as to avoid potential criminal and civil liability, and in some cases, to avoid a suspension of their state license to engage in cannabis and cannabis-related sales activity.

California Cannabis Sales Taxes

Pursuant to Proposition 64, both recreational and medical marijuana will now be subject to substantial taxes that can influence sales pricing. These taxes include:

  1. A cultivation tax of $9.25 per ounce of dried marijuana flowers, and $2.75 per ounce of dried marijuana leaves;
  2. A retail excise tax equivalent to 15 percent of the total retail price; and
  3. State and local sales taxes that can vary depending on the municipality (currently, rates vary but average around 8 percent of the total retail price).

Local jurisdictions are empowered to impose their own sales taxes as they see fit. In the city of Oakland, for example, the government imposes a 10 percent tax on marijuana sales that is tacked-on in addition to other applicable taxes. The cultivation tax is not directly imposed on consumers, but industry observers believe that it may have an upward pricing effect.

Medical Marijuana Tax Advantages

Under the new regulations, dispensaries may be licensed to sell both medical and recreational marijuana under the same roof. Still, there is good reason for those with an existing medical marijuana card will want to continue to use it — medical marijuana is not subject to state or local sales tax (though the sale will still be subject to an excise tax). As such, patients may purchase medical marijuana for a substantial discount that will vary from municipality to municipality.

It’s worth noting that the tax scheme for both medical marijuana and recreational marijuana in California is currently seen as a placeholder, and as a testing ground. Industry observers believe that there may be a correction in the tax scheme as more data is collected and as the market in California expands.