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Knowledge & Insights

Tax Breaks For California Cannabis Businesses


Local governments have begun scrambling to grant tax breaks and minimize the tax burden to cannabis businesses in California. The rush to give tax relief started a couple of years ago and has since accelerated. This comes as a result of state lawmakers’ inability to lower cannabis taxes in the state. And while state governments have been slow to react to the pleas from cannabis operators, cities and counties around California are coming to the rescue. 

Tax Relief by Local Communities

Thanks to cannabis industry associations, residents, and businesses, some cannabis operators are seeing light at the end of the tunnel. For example, the city of Los Angeles voted this week to reduce its cannabis business tax from 10% to 5%. Other municipalities have taken similar measures, including Berkeley, Oakland, Sacramento, and San Jose. Some counties have also joined in, such as Santa Barbara County. This district recently slashed cannabis taxes from $50 per square foot to $15.

The tax relief is welcome news for the cannabis industry. Especially since they’ve been struggling with high prices and taxes throughout the state. According to analytics, cannabis prices in California are currently about twice as high as they are in Colorado and Washington. This is largely due to the fact that cannabis businesses in California are subject to both state and local taxes.

Do Cannabis Tax Breaks Help or Hurt California Communities?

While many cannabis businesses support the tax relief, others argue that it could actually have negative consequences. For example, John Kagia of New Frontier Data said that “lowering taxes could incentivize more people to enter the market, which could lead to oversupply and lower prices. That could ultimately undermine the state’s efforts to control cannabis and ensure a regulated market.”

Supporters argue that taxation at all levels of the supply chain is simultaneously choking cannabis companies’ ability to stay afloat while strengthening the black market at the same time. Four recent bills have been introduced in the past few weeks around cannabis tax reform. Although there is still much debate at the state level on how these bills will finalize. 

It remains to be seen what impact these county and citywide tax rollbacks will have on the cannabis industry in California. However, it is clear that local governments are eager to provide relief in the absence of any action from the state government.

Cannabis Accounting Best Practices

That’s why we recommend working with a cannabis accountant. Our tax professionals specialize in the cannabis industry. We have years of experience navigating and lowering the tax burden for operators. Our accounting strategy provides cannabis operators with a compliant method of managing their finances to ensure fewer taxes are owed. By staying abreast with changing legislation and the expansion of the cannabis market, we can provide clients with expert advice and a clear understanding of regulations in their state. 

For more information on current cannabis tax reform in California, be sure to check out Assembly Bill 2792, AB 2506, Senate Bill 1281, and SB 1293 to learn more about the most recent bills introduced. 

Cannabis Tax Help

To learn more about minimizing your tax burden, reach out to our team of financial experts at GreenGrowth CPAs. We are here to help your cannabis venture through any level of the accounting, tax filing, or business cycle. 

We employ several financial programs to assist the company with its fiscal responsibilities, including tax planning and compliance, outsourced CFO support, audit preparation, tax controversy support, and much more.

For recommendations and assistance with tax planning and accounting services, schedule a free consultation or contact us at 1-800-674-9050.

Request a Free Consultation & learn how GreenGrowth CPA’s can help your business grow.

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