Changing the Cannabis Industry from the Inside

The legal cannabis industry is in the midst of a tax struggle in states that have approved adult-use marijuana (recreational or medical). A new year meant new tax concerns for states like California and continuing concerns for others. Industry stakeholders recently held a rally in Sacramento, Calif. on the steps of the state capitol to raise their concerns.

Repealing the state’s excise tax for equity retailers and repealing the cultivation tax for all growers across the state were two actions specifically highlighted as being necessary steps that the California legislature must address before its budget deadline of July 1, 2022. California Gov. Gavin Newsom has promised that his administration will address cannabis tax reform and better support the state’s small licensed operators who are fed up with tax rates.

Being vocal is a place to start when it comes to making change. Getting involved is a key to positively changing the cannabis industry and that starts from the inside. Most people don’t really like politics as it often requires significant amounts of time and money to make changes to laws. Just like other major industries, if cannabis wants to see legislators make decisions that support the growth of the industry, then getting involved is an absolute must. Since making big campaign contributions is something that most people don’t necessarily have the resources to do, inserting yourself into the action from the grassroots side of things is another effective approach.

Kema Ogden, co-owner of Top Notch The Health Center in Las Vegas, decided that was one of the best ways to make change. As the first African American woman dispensary owner in the state of Nevada, she serves on the Nevada Cannabis Compliance Board’s Cannabis Advisory Commission, its Subcommittee on Social Equality, Diversity and Inclusion, and she is also Board Secretary with Doctors for Cannabis Regulation, the first national organization of doctors to endorse legalization of adult-use cannabis.

“One of the best ways that we can fix things for our industry is to find opportunities to right the many wrongs that currently exist,” said Ogden. “Too many people are making decisions across the country that impact the financial viability of the cannabis industry without understanding the reality of things, especially with respect to small companies and minority operators. It’s imperative that leaders in our industry step up to the challenge of our time so that the legal, adult-use cannabis market will not only survive but thrive for everyone and not just those with the deepest pockets.”

U.S. Sec. of Transportation Pete Buttigieg (left) visited Top Notch The Health Center in Las Vegas, Nev. on Oct. 23, 2019. Kema Ogden (center) gave him a tour of the dispensary when he was campaigning as a Presidential candidate during the 2020 primary election. (Photo by Michelle L. Price/Associated Press)

Taxes are part of the landscape when it comes to voters and legislators approving adult-use cannabis in states throughout the U.S. A major problem with setting tax rates too high is that cities and states who are now relying on cannabis tax revenue to maintain or increase their annual budgets will fall short of those expectations. If a cannabis operator can’t afford high tax rates, they won’t be in business for very long and that doesn’t benefit anyone. Less competition means higher prices for consumers who will then be driven back to the illicit cannabis market which produces less revenue for state and local governments.

It is critical to lower tax rates and eliminate punitive taxes like Section 280E in the IRS tax code for many number of reasons. Leaders in the cannabis industry will need to be actively engaged with elected officials on the federal, state and local levels moving forward to ensure that cannabis laws are fair to the industry and consumers.

We would like to hear your thoughts on this topic because Oster and Associates has been helping cannabis brands evolve since 2017 and other industries grow for more than 35 years. Please let us know how we can help you reach your cannabis business goals.

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