Leisure World resident Carol, left, gets some help selecting a vape cartridge from Modern Buds general manager Jonny Sabella in Long Beach on Monday, Apr. 8, 2019. About a dozen seniors from Leisure World took a field trip to Modern Buds dispensary to gets some education as well as the opportunity to purchase cannabis products for either medicinal or recreational uses. (Photo by Scott Varley, Daily Breeze/SCNG)

Business

California’s budding cannabis industry prepares for another hit

High taxes, outlaw competitors make it tough for legal operators to make a buck

As year two of legal cannabis sales in California comes to a close, shoppers are still more likely to buy marijuana from illicit sellers than from state-sanctioned stores that pay taxes and test their products for safety.

California’s 7,000 licensed cannabis businesses — and the state’s tax revenue — are feeling the pinch.

Prominent cannabis companies that a year ago were growing aggressively have, in recent months, laid off hundreds of workers. They say hefty taxes, onerous regulations and competition from a thriving illicit market are forcing them to scale back operations.

Now the industry, which is already operating under effective tax rates of up to 70%, is bracing for another hit. Starting Jan. 1, marijuana retailers will pay 12.5% more in taxes than they do now, while cultivator taxes will go up more than 4%.

The unexpected move announced last month is being described as shortsighted by many in the industry. Licensed business owners point out that their outlaw competitors — retailers and others who haven’t received state licensing — can sell tax-free cannabis for a fraction of the price.

Read the rest of this story on mercurynews.com.