Here’s a snapshot of how new taxes will roll out for an average consumer in Los Angeles:
Currently, for legal medical cannabis, there is no specific state tax on cannabis and the city tax is 6 percent, which is usually incorporated into the sale price at the counter.
When the recreational market opens in January, an eighth-ounce bag that sells for $35 will be subject to a 15 percent state tax. A city business tax that typically gets passed on to consumers will add another 10 percent, and then the buyer will be hit with the usual sales tax, about 10 percent in L.A.
Businesses are being saddled with new taxes and costs on cultivation, distribution and testing, which will be rolled into the consumer price.
Together, operators say, that will push retail prices to $50 or $60 for that eighth-ounce purchase.
As for medical, the city tax would be lower, 5 percent, but retailers say that’s sometimes not passed on to the consumer.
Consumers with a valid medical marijuana identification card will not pay sales taxes.
So if your 18+ and do not want to pay those additional taxes on cannabis get your recommendation online by filling out our Patient Intake Form. If your under the age of 21 you will need to have a valid medical marijuana recommendation to purchase medicine.
A report last week from financial analysts Fitch Ratings concluded that state and local taxes could balloon to 45 percent for recreational marijuana in some communities.
“The existing black market for cannabis may prove formidable competitor to legal markets if new taxes lead to higher prices than available from illicit sources,” the report warned.
Some predict that prices will eventually come down as the legal market matures.
Other states with legal recreational pot have restructured taxes over time.
Washington state, for example, initially imposed separate 25 percent taxes up to three times: when the grower sold it to the processor, when the processor sold it to the retailer and at the point of public sale. In 2015 that was pushed down to a 37 percent tax at the point of retail sale, plus sales tax. In Seattle, that combined rate is about 47 percent for recreational sales.
“While our members, like any other business sector, would like to see a lower tax rate, we have not seen any evidence that current tax rate is diverting people into the black market,” Aaron Pickus, a spokesman for the Washington CannaBusiness Association, an industry group, said in an email.
There are other barriers to unregulated businesses entering the new system.
Nicole Howell Neubert, a marijuana industry lawyer, said a retail business could easily ring up $200,000 in permitting and other costs associated with compliance in the new legal market.
“When you add to that high tax rates, you increase the number of reasons why someone might not be able to become regulated,” she said.