California’s legal cannabis industry will collapse without immediate tax cuts and the rapid expansion of retail outlets, Governor Gavin Newsom has been warned in a letter signed by company executives, industry officials and campaigners.

The move follows years of complaints that the heavily taxed and regulated sector is unable to compete with the illicit market, which boasts much lower prices.

California Governor Gavin Newsom. Photo: Gage Skidmore

The letter asked for an immediate lifting of the cultivation tax placed on growers, a three-year holiday from the excise tax and an expansion of retail shops throughout much of the state. Around two-thirds of cities in California still don’t have dispensaries as it’s up to local governments to authorise sales and production.

The letter’s authors claimed the system is rigged against them.

“The opportunity to create a robust legal market has been squandered as a result of excessive taxation,” they said, adding 75% of cannabis in the state is consumed in the illicit market, is untested and unsafe.

“We need you to understand that we have been pushed to breaking point,” they told the governor, urging him to include their proposals in his upcoming budget proposal, which will be released early next year.

“The solution to these issues and the possibility of saving this industry lies in your hands,” they added.

A spokeswoman said the governor recognised the need for change and was willing to work with other legislators to achieve it.

“It’s clear that the current tax construct is presenting unintended but serious challenges. Any tax-reform effort in this space will require action from two-thirds of the legislature and the governor is open to working with them on a solution.”

Signatories to the letter, which was also sent to the state’s legislative leaders, included the California Cannabis Industry Association, the California arm of the National Organisation for the Reform of Marijuana Laws, the United Cannabis Business Association, Flow Kana, Harborside, and CannaCraft.

Prior to launching Cannabiz, Martin was co-founder and CEO of Asia-Pac’s leading B2B media and marketing information brand Mumbrella, overseeing its sale to Diversified Communications in 2017. A journalist...

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