'Really dire': California pot tax revenue falls for 7th straight quarter
![Various marijuana buds for sale are displayed at The Green Cross cannabis dispensary in San Francisco, Wednesday, March 18, 2020. As about 7 million people in the San Francisco Bay Area are under shelter-in-place orders, only allowed to leave their homes for crucial needs in an attempt to slow virus spread, marijuana stores remain open and are being considered "essential services." (AP Photo/Jeff Chiu)](https://kubrick.htvapps.com/htv-prod-media.s3.amazonaws.com/images/ap-20079067076267-1-1597367133.jpg?crop=1.00xw:0.846xh;0,0.154xh&resize=900:* "Various marijuana buds for sale are displayed at The Green Cross cannabis dispensary in San Francisco, Wednesday, March 18, 2020. As about 7 million people in the San Francisco Bay Area are under shelter-in-place orders, only allowed to leave their homes for crucial needs in an attempt to slow virus spread, marijuana stores remain open and are being considered "essential services." (AP Photo/Jeff Chiu)")
Warning lights continue to flash bright red for California’s cannabis industry as companies struggle to pay their bills, legal cannabis sales continue to drop and pot tax revenue falls for the seventh straight quarter.
The latest tax figures released by the California Department of Tax and Fee Administration, or CDTFA, showed that cannabis excise taxes fell a whopping 18.8% in the first quarter of 2023. That’s the seventh quarter in a row in which excise tax collections have fallen for the industry.
The falling tax revenue is the latest domino to fall in what appears to be a long-brewing economic crisis in the industry. Farmers have been reporting for years that they’ve been stiffed by distributors, distributors say that they’re not being paid by retailers, and now tax revenues are in a free fall.
California’s legal market also continues to shrink. Total cannabis sales in the first quarter of 2023 were down 1.4% from the previous quarter, continuing a multi-year trend of falling revenue for pot stores statewide.
Marc Hauser, a cannabis consultant and former attorney specializing in the cannabis industry, said the downturn is a combination of less consumer spending because of the end of the pandemic, when people bought more cannabis, and continued stress from high tax rates on the industry.
“I think it is really dire out there for the vast majority of cannabis operators,” Hauser told SFGATE in an email. “It has been for some time, and I honestly don’t see anything on the horizon that will change it.”
Latest tax figures
The CDTFA reported that $104.2 million in cannabis excise taxes was collected in the first quarter of 2023, down more than 32% from tax collections during the same quarter a year earlier. The latest drop means that the state’s cannabis excise tax revenue has dropped for seven consecutive quarters, falling 42% since the second quarter of 2021, when the state brought in $180.4 million in cannabis excise taxes. California charges a 15% excise tax on legal cannabis products, in addition to state sales tax and any local taxes charged.