State reports growing cannabis revenue


Revenue falling short locally

WATSONVILLE — California’s cannabis industry generated $144.2 million in the second quarter of 2019, a jump from the first quarter, and a promising indicator for an industry many local jurisdictions saw as a cash cow for tax revenue when voters legalized marijuana in 2016.

The California Department of Tax and Fee Administration (CDTFA) reported $120.8 million for the first quarter of the year.

As of Aug. 16, California’s cannabis excise tax generated $74.2 million in revenue reported in the second quarter 2019 returns due by July 31, and the cultivation tax generated $22.6 million.

Sales tax from cannabis businesses totaled $47.4 million in reported revenue for the same period, the CDTFA stated in a press release Thursday.

The $144.2 million does not include tax revenue collected by each jurisdiction. 

After Proposition 64 went into effect, two new cannabis taxes followed two years later. The first was a cultivation tax on all harvested cannabis that enters the commercial market. Purchasers of pot also pay a 15 percent excise tax for cannabis and cannabis products. 

Also, sales are subject to state and local sales tax.

Watsonville City Manager Matt Huffaker said that local cannabis revenues have so far fallen short of predictions, due to volatility of the new market.

According to Huffaker, the city ended the 2018-19 fiscal year with a total of $425,000. City officials expect the revenues this year to exceed that number, he said. 

“…the potential is there, and I think we'll continue to see modest growth as the dust settles and the industry matures,” Huffaker said. 

Santa Cruz County reported $2.028 million in tax revenues from its dispensaries in the 2018-19 fiscal year, a 10 percent decrease from the year before.

The county’s cultivators and other non-retail cannabis businesses brought in $470,512 in 2018-19, representing a 46.5 percent drop from the previous year.

Santa Cruz County spokesman Jason Hoppin said that the dispensary taxes fund ongoing cannabis operations and regulation. The excess, he said, goes toward county programs such as the Thrive by Three program, which supports young children and their parents. 

“We’re putting the money to good use,” he said. 

County officials expect cannabis revenues to stabilize over the years as local and state officials get used to the relatively new market.

“This is something California has never done before,” he said. “It’s going to take some time to get it right, and it will probably be a few years to see what a regulated industry in the state looks like.”

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