Surging Sales Boost Calif. Pot Tax Revenue

By Willis Jacobson
Dec 7, 2020
(Photo Illustration by Scott Olson/Getty Images)

California cannabis sales have surged this year, according to tax data recently released by the state.

The state generated $306.7M in revenue from cannabis taxes over Q3 of 2020, according to a November report from the California Department of Tax and Fee Administration (CDTFA). That total, which does not include taxes collected by local jurisdictions, represents an increase of $46.5M from the prior quarter.

Pot taxes are helping the state offset budget losses related to the pandemic.

Separate from the Q3 report, the California Legislative Analyst’s Office (LAO) boosted its cannabis tax revenue estimate for the overall 2019-20 fiscal year by $45M, bringing it from $477M to $522M. That revision was driven largely by a strong fourth quarter, from April through June, according to the LAO.

The updated figures show “very strong revenue growth amid [the] pandemic,” according to the LAO.

A look into the numbers:

  • Of the $306.7M reported for Q3 2020, $159.8M came from excise tax, $105.9M from sales tax, and $41M from cultivation tax. (Retailers must pay excise taxes to distributors based on the weight of the product purchased. Those costs are then typically built into the retail price and passed on to consumers.)
  • The Q3 revenue marks a nearly 80% increase year over year.
  • Since going live on Jan. 1, 2018, California’s REC market has generated $1.8B in tax revenue to fund a wide range of programs and services. Tax revenue from 2019-20 fiscal year was used to support youth drug use prevention and early intervention and treatment programs ($119.3M), environmental restoration and protection ($39.8M), and state and local law enforcement agencies ($39.8M), among other projects.

Last month, the Bureau of Cannabis Control announced it would award nearly $30M in grants – with funding derived from cannabis taxes – to nine public universities for 34 pot-related research studies.