CDTFA – Wrong Answer
CDTFA – Wrong Answer – we have written a half dozen posts that attempt to articulate the steps that CDTFA needs to undertake to:
Eliminate “Leakage” to Insure that Cannabis Cultivation Tax [“CCT”] and Cannabis Excise Tax [“CET”] which is collected by Distributors is remitted to CDTFA.
Overhaul the reporting and collection process so that it becomes easier for licensees to collect, report and remit cannabis taxes [ See CCT – CET Collection Mechanics]
Add “responsible person” provisions to the CCT – CET regime to provide CDTFA with an enforcement mechanism that “has teeth”
CDTFA – Wrong Answer
We continue to see articles written about California missing cannabis tax revenue estimates, and just about every single one that we have read gets it wrong.
Reducing the CCT and CET tax rates will only have a minimal impact on increasing revenue.
Bringing back the “War on Drugs” against unlicensed activity will land more people in jail and build resentment, but it won’t significantly increase tax revenues.
Simplifying the licensing process, streamlining the reporting and collection process so that the compliance burden on licensees is reduced is the key increasing both the overall percentage of cannabis activity that “gets legal” and “pays taxes”
A recent article stated:
“Numbers are in for California’s first full year of legal adult use sales, and tax revenue for the state came in at $345 million, nowhere close to early estimates of $1 billion, according to California’s Department of Tax and Fee Administration. In January, those initial expectations were lowered in California Gov. Gavin Newsom’s first budget, for 2019-2020, in which he estimated $514 million in cannabis excise tax revenue.
Quarterly tax revenue grew substantially between the first and final quarters of the year, from just over $60 million to just over $100 million, so Newsom’s estimate might be on point, especially as the state — the country’s most populous and the one with the longest history with the plant — ramps up enforcement against unlicensed operators and they become a thing of the past.”
They couldn’t be more wrong…haven’t we learned the lesson that draconian enforcement does Improved tax collection would bring more $$ to the people of California, increase compliance and cause more participants in the cannabis industry to “get legal”. We can’t begin to express our frustration with efforts to lower the tax rates, which by themselves will have minimal effect until CDTFA makes a serious effort to improve the process.
At this point, we are sick and tired of listening to yammering and whining about the issue by people that haven’t done anything to understand the underlying causes of the problem, or better yet, become part of the solution.