AP NEWS

California reports far less tax revenue from first year of marijuana sales than initially projected

February 20, 2019

Recreational marijuana sales generated fewer than $350 million in tax revenue for the state of California during 2018, regulators announced Tuesday a far cry from the billion dollars in annual revenue previously projected.

California collected a total of $345.2 million in revenue last year as a result of excise, sales and cultivation taxes imposed on its infant recreational marijuana industry, according to figures released by the state Department of Tax and Fee Administration.

Implemented in the wake of voters casting ballots to legalize marijuana in November 2016, California’s scheme for taxing and regulating retail sales took effect Jan. 1, 2018, making the state the most populous of the seven and counting that currently permit adults to legally purchase pot for recreational purposes.

The state’s independent Legislative Analyst’s Office had projected that legalizing recreational marijuana within California could generate upwards of $1 billion in annual tax revenue, and former Gov. Jerry Brown, a Democrat, at one point estimated the state would reap $643 million in related taxes during the fiscal year ending July 1, 2019. Mr. Brown’s successor, Gov. Gavin Newsom, a Democrat, has since significantly lowered that projection to $355 million.

California reaped $204.1 million in recreational marijuana-related tax revenue during the first half of the current fiscal year, putting the state on path to likely meet the governor’s latest, revised projection.

Recreational marijuana sold by licensed vendors in California is subject to a cultivation tax imposed on harvested cannabis that enters the market, as well as a 15 percent excise tax and standard state and local sales taxes.

Combined revenue generated by the cultivation, excise and state sales tax grew from $60.9 million during the three months of 2018, to $103.3 million during the final three months of the year.

Marijuana is illegal under federal law, though most states have legalized the plant for either medicinal or recreational purposes.

California, Nevada, Massachusets and Maine all voted in 2016 to legalize the sale of recreational marijuana. Nevada began allowing retail dispensaries to operate in July 2017, while Massachusetts failed to follow through until late 2018. Maine, meanwhile, has not yet authorized any marijuana dispensaries to conduct retail sales.

Nevada regulators previously reported that the state’s recreational marijuana industry generated $69.8 million in tax revenue during its first full year, or about 140 percent more than regulators had anticipated.