The California Department of Tax and Fee Administration (CDTFA) reported cannabis tax revenue for the fourth quarter of 2023 hit $268.3 Million. 

The numbers are as of Feb. 16 and based off $1,251,330,833 in taxable sales. The number includes $156.5 million generated from the excise tax and the other $111.8 million collected from cannabis businesses was a result of the sales tax. Final adjustments will come with the numbers from the first quarter of the year. 

We also got the finalized third-quarter numbers. That number shows a small dip from the third quarter of 2023 where the CDTFA collected exactly $10 million more in cannabis taxes across the board. Reported revenue for the third quarter of 2023 returns has been revised to $278.3 million, with $164 million attributed to cannabis excise tax and $114.3 million to sales tax.

But even with the dip, it’s clear, that efforts to drive up tax revenue even as relief was being provided by the cancellation of the cultivation tax have worked. The state is up $20 million in tax receipts compared to the final quarter of 2022. What’s to say that number might not have been even higher had struggling farmers been provided relief sooner?

The more refined and farmer-friendly the market gets, the easier it will be to celebrate the process. When I see the state has collected $5.74 billion in taxes since 2018, I understand that is a lot of money that goes to a lot of great causes and a bunch goes to causes that it had to for the widest coalition to vote yes. If none of the cultivation tax had ever been collected, the state would still be at over $5 billion in revenue.

More relief anytime soon will be a bit trickier. Recent years have seen California go from a massive budget surplus a few years ago to an expected $68 billion deficit this year. As much as it is still needed, the times dictate it’s going to be tough to get much more tax reform done in the moment. 

Lawmakers won’t want to be put in a situation where as they have to start making hard decisions around the budget, they’re called out on tax cuts for the industry. A lot of people out there still have it in their head that being in the cannabis industry is like printing your own money. They can’t even fathom the actual margins that people are operating on in hopes of staying afloat. 

On top of things seeming to maintain at the very least from quarter to quarter, there are other solid takeaways from the close of 2023. Eligible cannabis vendors were able to hold on to an extra $1.16 million in licensing fees being waived through the Vendor Compensation Program. It allows cannabis retailers that have been approved by the Department of Cannabis Control

(DCC) to receive an equity fee waiver when they renew their retailer license. Eligible cannabis retailers also may be approved to retain 20% of the cannabis excise tax due on their retail sales. Depending on the size of the operation, that 20% could go a long way.  

If you’re going to try and take advantage of the program, do it fast so you can maximize your results. It’s currently scheduled to end on Dec. 31, 2025.

If everything stays on this constant pace, there is an excellent chance the California market breaks $6 billion in taxes collected by the state in the first quarter of 2024. 

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