National statistical reports are showing many cannabis facilities, both medicinal and recreational, approved by the states, are losing their businesses because of low demand and high tax rates. The closure of such facilities have taken place, or are about to close, in Southwest Riverside County, while other dispensaries in other Southern California county areas are reporting record sales.
Some economists have reported that in 2021 California’s marijuana and cannabis sales peaked, but sales since then have been “Coasting at a lethargic and slightly downward trajectory, with sales much lower than expected.”
Many of the Riverside County and local city’s cannabis facilities have been in business since shortly after the drug, derived from addictive marijuana plants, was declared legal by the State of California for limited uses. However, high state taxes, excise taxes, business licensing, sales taxes, and other conditional use requirements, like private security and employee wages have made the licensed cannabis businesses difficult to maintain with very little profit, or no profit at all.
Such has been the case for the Culture Cannabis Club, the only dispensary in the private community of Canyon Lake. The CEO of the dispensary, Devon Julian, less than a year after opening in September of 2023 reported on social media that, “With regret, we are announcing the closure of Culture Cannabis Club in Canyon Lake.
“Despite our high hopes and the initial enthusiasm for legal cannabis in the area, we were unable to sustain our operations. Even with the city’s efforts to reduce the operational costs, minimum fees, and other support, the demand did not meet our projections, and we faced insurmountable financial challenges.”
In the Valley News’ circulation area, it was reported out of the San Jacinto City Council meeting on August 20 that Fatima Rahman, owner of a legal and licensed cannabis store, and three other San Jacinto dispensary owners were about to close their businesses in the city before the end of September because of the high taxes, fees, licenses, security and employee wages. Their closures, if they occur, could cost the city up to $4 million in revenue each year. Not to mention the illegal and black market dispensaries still operating in the area who would benefit. Rahman said she was willing to work with the city to reduce some of the taxes, as some other cities have done, so they could stay in business.
Rahman, the owner of other cannabis operations and businesses in the city including a cannabis cultivation farm and body shop audio business, was satisfied with the tax and fees placed on that part of her enterprises, but she was having to borrow money from those operations just to keep her dispensaries open.
She also pointed out that the neighboring city of Hemet reduced some of their fees which are now lower than San Jacinto, which has higher cannabis taxes and fees than any other in the state. She adds the California tax and county taxes that already charge more than 15% of her dispensaries’ gross sales. “I just can’t stay in business,” she argued.
In an August 22 article in the MJBizDaily, it was reported that an increasing number of county and local elected officials across the state are acknowledging a longtime cannabis industry grievance – that legal cannabis taxes are too high – and cutting local levies on retail, business operations or both. They contend that the legal cannabis market is simply just too expensive and law enforcement thus far has not been able to punish the illicit markets out of existence. They reported some cities have actually dropped all their local taxes on the dispensaries and other cannabis facilities.
In California, the state levies a 15% excise tax on cannabis sales that is paid by consumers and remitted to retailers. Riverside County does not charge a cannabis sales tax while the state sales tax is now at 7.75% which is often increased by local city voter approved one-cent sales taxes. San Jacinto is one of those cities that has a voter approved one-cent sales tax added to the state’s sales tax.
San Jacinto charges 15 cents for each $1 of gross receipts for cannabis retail sales, $10 per square foot for distribution, transport and other commercial activity and $5 per square foot for outdoor cultivation of cannabis. Indoor cultivation is $12 per square foot.
The rates are subject to adjustment by the City Council who are hearing the dispensary owners’ pleas. San Jacinto Mayor Phil Ayala indicated a cannabis fee discussion may be placed on the City Council Agenda at the end of September or first week of October.
Tony Ault can be reached at tault@reedermedia.com.
National statistical reports are showing many cannabis facilities, both medicinal and recreational, approved by the states, are losing their businesses because of low demand and high tax rates. The closure of such facilities have taken place, or are about to close, in Southwest Riverside County, whi Read More