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California Governor’s New Budget Proposal Calls For Fewer Taxes, More Retail, New Method of Excise Tax Collection and Remittance

In the latest revision of his proposed 2022-2023 state budget announced May 13, California Gov. Gavin Newsom aims to address major concerns from cannabis industry stakeholders.

For one, Newsom’s proposed budget for the fiscal year beginning July 1, 2022, proposes setting the cultivation tax rate at zero beginning that day.

RELATED: New Study Finds Keeping or Eliminating California’s Cannabis Cultivation Tax Yield Similar Revenues

The revised budget proposes “[s]hifting the point of collection and remittance for excise tax from distribution to retail on January 1, 2023, maintaining a 15 percent excise tax rate.”

Additionally, “Allocation 3 funding for youth education/intervention/treatment, environmental restoration, and state and local law enforcement programs” would be set at a baseline of $670 million annually for three years. The enacted budget for Allocation 3 funding in the 2021-2022 fiscal year was $129.1 million.

Per the revised budget proposal, “Up to $150 million one-time General Fund is available as needed through 2025-26 to backfill Allocation 3 funding, along with the authority to increase the excise tax rate through 2024-25 if tax revenues fall below the baseline for Allocation 3.”

The revised proposal also includes $20.5 million that would “establish a cannabis local jurisdiction retail access grant program.” That funding would go toward establishing more retail and consumer access “to regulated and tested products through an expansion of California’s legal marketplace.” Eligible jurisdictions are based on their population sizes, the number of permits issued in them, and whether they issue permits to equity applicants.

The California State Legislature has until June 15 to pass the budget, according to its Senate.

 

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