Pubdate: Sun, 05 Nov 2017
Source: Los Angeles Times (CA)
Copyright: 2017 Los Angeles Times


California's legal marijuana marketplace is coming with a kaleidoscope
of new taxes and fees that could influence where it's grown, how pot
cookies and other munchies are produced and the price tag on just
about everything.

Be ready for sticker shock.

On a retail level, it costs about $35 to buy a small bag of good
quality medical marijuana in Los Angeles, enough to roll five or six

But in 2018, when recreational sales take hold and additional taxes
kick in, the cost of that same purchase in the new market is expected
to increase at the retail counter to $50 or $60.

At the high end, that's about a 70% jump.

Medical pot purchases are expected to rise in cost too, but not as
steeply, industry experts say.

Or consider cannabis leaves, a sort of bottom-shelf product that comes
from trimming prized plant buds. The loose, snipped leaves are
typically gathered up and processed for use in cannabis-laced foods,
ointments, concentrates and candies.

Growers sell a trash bag stuffed with clippings to manufacturers for
about $50. But come January, the state will tax those leaves at $44 a

That means the tax payment on a bag holding 7 or 8 pounds would exceed
the current market price by five or six times, forcing a huge price
hike or, more likely, rendering it essentially valueless.

"All it would become is compost," predicted Ryan Jennemann of THC
Design in Los Angeles, whose company has used the leaves to
manufacture concentrated oils.

Governments struggling to keep up with the cost of everything from
worker pensions to paving streets are eager for the cascade of new tax
money from commercial pot sales that could eventually top $1 billion

But higher taxes for businesses and consumers give the state's
thriving illicit market a built-in advantage. Operators in the legal
market have been urging regulators to be aggressive about shutting
down rogue operators.

Donnie Anderson, a Los Angeles medical cultivator and retailer,
predicted the higher level of state taxation next year is "just going
to help the illicit market thrive." He said more needs to be done to
cut the cost, especially for medical users, many of whom won't be able
to absorb a price jump.

The increased tax rates are just one part of California's sprawling
plan to transform its long-standing medical and illegal markets into a
multibillion-dollar regulated economy, the nation's largest legal pot
shop. The reshaping of such an expansive illegal economy into a legal
one hasn't been witnessed since the end of Prohibition in 1933.

The change has come haltingly. Many cities are unlikely to be ready by
Jan. 1 to issue business licenses, which are needed to operate in the
new market, while big gaps remain in the system intended to move
cannabis from the field to distribution centers, then to testing labs
and eventually retail shops.

The path to legalization began last year when voters approved
Proposition 64, which opened the way for recreational pot sales to
adults. Medical marijuana has been legal in California for about two

Come January, state taxes will include a 15% levy on purchases of all
cannabis and cannabis products, including medical pot.

Local governments are free to slap on taxes on sales and growing too,
and that has created a confusing patchwork of rates that vary city to
city, county to county.

In the agricultural hub of Salinas, southeast of San Francisco, voters
approved a tax that will eventually rise to $25 a square foot for
space used to cultivate the leafy plants, a rate that's equivalent to
about $1 million an acre.

But farther north, in the pot-growing mecca of Humboldt County, rates
will be a comparative bargain, ranging from $1 to $3 for a square foot
for cultivation space.

By some estimates Humboldt County has up to 15,000 unregulated pot
grows, and Supervisor Ryan Sundberg said he was eager to fashion a tax
scheme that would encourage cultivators to come into the legal system
and adhere to environmental regulations.
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