By The cannabis industry paid more than $1.8 billion in additional taxes in 2022 alone, according to data from cannabis research firm Whitney Economics. And, spoiler alert: This article does not have a happy ending. Ssion Public Relations Newsletter That figure is expected to jump to $2.1 billion in 2023, according to a report by .
As high times He continues to write with deep frustration that so far the legal cannabis industry has had little success in building accessible business models. California, among other states, has seen a massive exodus of legal cannabis companies such as Jerry Garcia’s Legacy Brands leaving the state due to exorbitantly high taxes and bureaucratic procedures. Despite continued efforts to help communities most affected by the war on drugs enter the legal market, celebrity brands face jail time for non-violent cannabis crimes if they fail to turn a profit. After all the financial and emotional turmoil, how do we start life? Should I live a decent life?
So why are taxes on the cannabis business so high? Remember, your cute pre-rolls and vegan edibles are still technically Schedule I substances. That means cannabis “is currently not approved for medical use and has a high potential for abuse,” according to federal officials. With 38 states and Washington, D.C. currently operating medical cannabis programs, this is scientifically inaccurate and regressive, not to mention hypocritical. Taxes on legal market people show that legalization could help a thriving black market, not the utopia we hoped it would be. Overtaxing legal cannabis businesses is not only harmful to their operators, it drives up prices and isolates potential customers.
Cannabis companies are subject to Federal Tax Section 280E, which “reduces gross income by cost and does not allow deductions for ‘ordinary and necessary’ business expenses (such as under-the-line deductions). punishes Schedule I or II drug traffickers. COGS (COGS) on goods sold is essentially a federal income tax liability that is calculated based on gross income, not net income.” bloomberg tax.
Add the stress of the 280E to other hurdles to the cannabis business, such as difficulty accessing banking services and restrictions on interstate commerce, and the result is an unprofitable legal cannabis business for many businesses. . Effective tax rates for cannabis retailers often exceed 70%.
As Ssion Public Relations Newsletter As a result, 24.4% of cannabis businesses surveyed said they were profitable, according to the report. And things have gotten even more dire in the last year. That figure was 42%. And while it’s tempting to blame the post-pandemic economy, other industries are also thriving. According to BloombergU.S. corporate profits in 2022 are at their highest margins since the 1950s.
As we warned earlier in this article, don’t expect the legit market to breakthrough and improve anytime soon. Later this month, Whitney Economics will release a study that says the cannabis business is holding on to the edge and shouldn’t be expected to turn around in the near future.
“The cannabis industry is in dire economic straits and the current regulatory and tax environment is unsustainable in the short term,” said Bo Whitney, chief economist at Whitney Economics, according to a press release. He added that many state markets were “on the brink of the collapse of the whole system.” The report suggests tax reform is the only solution to the problem. With the right tax laws, the cannabis industry could generate billions of dollars in profits, not just government taxes. Whitney Economics projects that if 280E and cannabis policies are properly reformed, the industry will see more jobs and economic activity will increase by $35.2 billion over 10 years.
Reuters report Three Senate Democrats introduced a bill to remove cannabis from the Controlled Substances Act in July 2022 and invalidate the controlled substance Code Section 280E. The Cannabis Control and Opportunity Act would impose an excise tax of up to 25% on products sold by major cannabis companies. Still pending at time of report.
