California marijuana companies warn of an impending industry collapse – NBC Los Angeles

California cannabis leaders warned Governor Gavin Newsom on Friday that the state’s legal industry was on the verge of collapse and needed immediate tax cuts and a rapid expansion of retail stores to stabilize the shaky market.

The letter, signed by more than two dozen executives, industry officials, and advocates of legalization, followed years of complaints that the heavily taxed and regulated industry was unable to compete with the widespread illegal economy, where consumer prices are much lower and sales are much lower double or triple the legal business.

Four years after the start of the broad legal business, “our industry is collapsing,” says the letter, which was also sent to the legislative leaders in Sacramento.

Industry leaders called for an immediate lifting of the cultivation tax for growers, a three-year leave of absence from excise duties, and an expansion of retail outlets across much of the state. It is estimated that about two-thirds of California’s cities go without pharmacies as it is up to local governments to authorize sales and production.

The current system “is so rigged that all will fail,” they wrote.

“The opportunity to create a robust legal market was wasted through excessive taxation,” the letter says. “Seventy-five percent of cannabis in California is consumed in the illicit market and is untested and unsafe.”

“You have to understand that we have been brought to a breaking point,” they told the governor.

Newsom spokeswoman Erin Mellon said in a statement that the governor supports cannabis tax reform and recognizes the need to change the system while expanding enforcement measures against illicit sales and production.

“It is clear that the current tax structure poses unintended but serious challenges. Any tax reform effort in this area requires action from two-thirds of the legislature and the governor is open to working with them on a solution, “Mellon said.

Companies, executives, and groups that signed the letter included the California Cannabis Industry Association, the California branch of the National Organization for the Reform of Marijuana Laws, the Los Angeles-based United Cannabis Business Association, Flow Kana Inc., Harborside Inc. . and CannaCraft.

On a conference call with reporters, Strong Agronomy’s Darren Story said difficult market conditions had forced him to lay off more than half of his workforce. He said taxes, which will rise next year, make it an easy choice for buyers. With prices in the underground half of what they see on legal shelves, he said “most consumers will take off”.

The companies asked Newsom to include their proposals in its upcoming draft budget, which will be released early next year.

“The solution to these problems and the ability to save this industry is in your hands,” they wrote.

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