State tax policies

Cannabis tax policy varies widely from state to state, and can play a big role in driving the dynamics of a particular market. Everyone reading this knows about 280E, but you should also be watching state tax laws.

California has been struggling with taxes imposed on cultivators based on production or canopy, but not sales. This has resulted in high tax bills even though growers can’t sell their crop, which is not a sustainable system. In one local response, Humboldt County has partially suspended Measure S (the local cannabis cultivation tax) in an effort to provide relief to growers. 

Meanwhile, New York is forging ahead with a novel potency tax that will tax THC content. While some observers speculate that this could be the key to encouraging something other than high-THC products, others believe this tax structure could result in retail prices of $70/eighth. This is a significantly higher price point than the unregulated market offers. And this tax hits the distributors, which means it could suffer the same problems as California’s cultivation tax and be insensitive to fluctuations in what the product actually sell for. 

Regardless, we like to see experiments in regulatory policy and we will be watching closely as NY rolls this one out.