California’s adult-use retail market had its best year on record, netting more than $5.2 billion in sales in 2021, according to year-end data released Feb. 23 by the state’s Department of Tax and Fee Administration (CDTFA).

The $5.2-billion benchmark represents a 17.1% year-over-year increase from 2020’s $4.4 billion in sales.

Overall, nearly $1.3 billion in total tax revenue was generated in 2021, which includes excise, cultivation and sales taxes. Specifically, California collected $163.2 million in cultivation taxes in 2021, at a time when that tax is currently on the chopping block.

RELATED: New California Bill Proposes an End to the Cannabis Cultivation Tax

The cultivation tax “makes absolutely no sense,” Graham Farrar, co-founder and president of Glass House Brands, told Cannabis Business Times last month after Gov. Gavin Newsom called for cannabis tax reform in his budget proposal. Glass House’s Santa Barbara-based operation encompasses more than a half a million square feet of sustainably grown, craft-at-scale cannabis.

“It’s weight-based, which means it goes up as a percentage as prices compress, and [it] hits outdoor farmers the hardest,” Farrar said of the cultivation tax.

For instance, if a greenhouse grower endures a $160 cultivation tax for a pound of cannabis that wholesales at $1,000 per pound, and an outdoor grower endures the same $160 cultivation tax for a pound of cannabis that wholesales at $500 per pound, then the tax burden would be 16% for the greenhouse grower and 32% for the outdoor grower.

The state’s current cultivation tax rate is $10.08 per dry-weight ounce for flower, $3 per dry-weight ounce for leaves, and $1.41 per ounce of fresh cannabis plant.

Meanwhile, California’s excise tax generated $668.5 million in 2021, while its sales tax generated $462.9 million.

Overall, California adult-use retailers have sold roughly $13.5 billion of cannabis since sales launched in January 2018.

Since that launch, total cannabis tax revenue to date is $3.44 billion, including $1.74 billion in cannabis excise tax, $431.82 million in cultivation tax, and $1.27 billion in sales tax, according to CDTFA.

The total reported cannabis tax revenues do not include locally imposed taxes collected by cities and counties.

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