california Archives - Green Market Report

Sean HockingSean HockingSeptember 16, 2019
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11min610

If you wish to re-publish this story please do so with the following accreditation
AUTHOR:  aBIZinaBOX Inc. CPAs – Jordan S. Zoot, CPA
PUBLISHER:  CANNABIS LAW REPORT

Un Pesce Marcisce Dalla sua Testa is an old Sicilian proverb that translates “a fish rots from its head”. The statement appears to be an accurate summary of the present condition of both the private and governmental sides of California’s cannabis industry.

A Los Angeles Times article September 11th that was headlined “Nearly” stated,

‘The audit[1], conducted by the United Cannabis Business Association.[2], found approximately 2,835 unlicensed dispensaries and delivery services operating in California. By comparison, only 873 cannabis sellers in the state are licensed, according to the Bureau of Cannabis Control [“BCC”]

 We were a bit surprised to discover that UCBA is afflicted by the same type of intentional disregard for the statutes and regulations governing not-for-profit corporations, business leagues and mutual benefit corporations as other California cannabis businesses. Most of the organizations that purport to speak for the businesses and individuals that comprise California’s legal cannabis industry are under suspension, never completed registrations, filed erroneous organizational documentation, or have failed to file correct tax returns and reports with the California Department of Tax and Fee Administration (“CDTFA”) or the California Attorney General Charities Division [See Who is Inept? ].

The September 11th article continues,

This year, an industry-backed financial audit projected that roughly $8.7 billion will be spent on unregulated cannabis products in California in 2019, compared with just $3.1 billion spent on cannabis sold by legal businesses.”

If we accept those figures, then the average “black market” cannabis business has annual sales of $3.1MM, and the average “legal dispensary” has sales of $3.6MM. We have created numerous models of the financial revenues, costs and returns for the legal cannabis industry in California [See Allocation – Costs – Gross Profit – Taxes and It’s the Math]. The taxes that California should be collecting are approximately 31% of the gross receipts of cannabis businesses, or $960K for each “black market” cannabis entity, and $1.1MM per legal cannabis entity. The annual total for cannabis taxes for “black market” and legal business should be $3.66B [2,835 *$960K + 857*$1,100K] for the current year.

It is our recollection CDTFA recently announced the cannabis taxes collected for the second quarter of 2019 were $144.2MM[3] vs. $915MM California should be collecting. While we understand there are several contributing factors, we will start by laying blame on CDTFA. CDTFA has proved to be inept, inefficient and lethargic in its administration of cannabis taxes. It also was incredibly poor in its design of its systems and controls for the collection, reporting and remittance of cannabis taxes [See Missing or Uncollected and Taxes – Cannabis – Myth  and Cannabis Taxation – Reality Check].

 

We have commented extensively on the underlying problems. We have described proposed corrective actions CDTFA and the regulatory agencies could take. With rampant abuse of the law by industry associations and experts combining with a perpetuation of “black market” businesses, and death and maiming from toxic vaping cartridges[4], it seems unlikely the California Attorney General, the United States Attorneys for the Districts in California, the Drug Enforcement Administration [“DEA”] will continue for long to treat the stand down from the “War on Drugs”[5] as meaning to become catatonic.

 

There is a place for aggressive law enforcement efforts in California’s cannabis industry [e.g. flagrant tax evasion, circumvention of laws that places the health and safety of the public at risk, and repeat offenders engaging in significant illegal cannabis activity] are warranted. At some point, such individuals need to have the “entire bookcase” thrown at them.

While we understand the urgency of preventing further loss of life with toxic vaping cartridges, we view the abuses by the organizations we identified in “Who is Inept?” to be equally toxic to the legal cannabis industry. Those who knowingly violate the laws and regulations relating to nonprofit and tax exempt status should also aggressively prosecuted.

On the public side, it is also galling to us when we see local governmental agencies selling licenses to cannabis businesses that will never succeed in order to generate license application revenue and encouraging cannabis businesses based on “social equity” without providing the support and training required for such businesses to succeed. A number of local jurisdictions are as culpable as the abusers of the tax and nonprofit laws with their encouragement of cannabis business investment in the local community for the supposed tax revenue that will be generated.

Greed drives the public side at a local level as hard as it drives the private side.

[1] We note that the term “audit” is being used as a journalist rather than as it would be by the only professionals licensed to perform “audits” or examinations of financial statements – certified public accountants [“CPA’s]. The definition of an audit or examination of financial statements is described California Business and Professions Code, Division 3, Chapter 1, Article 3, Section 5051(c).

[2] United Cannabis Business Association [“UCBA”] is a DBA of a California Nonprofit Mutual Benefit Corporation organized under the name UCBA Trade Association.   The California Secretary of State Corporate No. is: C3857701; the California Attorney General Registry No. is: CT0229633. The Articles of Incorporation state is an IRC Sec. 501(c)(6) organization.

IRC Sec. 501(c)(6) of the Internal Revenue Code provides for an exemption from income tax for business leagues, chambers of commerce, real estate boards, boards of trade and professional football leagues, which are not organized for profit and no part of the net earnings of which inures to the benefit of any private shareholder or individual. An organization that otherwise qualifies for exemption under IRC Sec. 501(c)(6) will not be disqualified from the exempt status merely because it engages in some political activity. In addition, the organization may engage in lobbying that is germane to accomplishing its exempt purpose without jeopardizing its exempt status.

A business league is an association of persons having some common business interest the purpose of which is to promote such common interest and not to engage in a regular business of a kind ordinarily carried on for profit. Trade associations and professional associations are business leagues. In order to be exempt from income tax, a business league’s activities must be devoted to improving business conditions of one or more lines of business as distinguished from performing services for individual persons.

 

No part of a business league’s net earnings may inure to the benefit of any private shareholder or individual and it may not be organized for profit to engage in an activity ordinarily carried on for profit (even if the business is operated on a cooperative basis or produces only enough income to be self-sustaining).  The term line of business generally refers either to an entire industry or to all components of an industry within a geographic area.  It does not include a group composed of businesses that market a brand within an industry.

 

[3] See California Department of Tax and Fee Administration Reports Cannabis Tax Revenues for the Second Quarter of 2019

[4] Deaths, illnesses related to vaping cannabis on the rise, health authorities say

[5] Bringing Back The War


Sean HockingSean HockingSeptember 7, 2019
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11min2030
If you wish to re-publish this story please do so with following accreditation
AUTHOR:  aBIZinaBOX Inc. CPAs – Jordan S. Zoot, CPA
PUBLISHER:  CANNABIS LAW REPORT

 

On August 6th we published an article that described the financial benefits of the use of a properly organized Cannabis Cooperative Association (“CCA”) to move cannabis as adult-use flower from cultivator to consumer. [See CCA’s Beat Underground ] On August 8th we published an article that described the financial benefits of moving cannabis as adult-use oil through a CCA. [See CCAs Create Profits ]This article describes the additional financial benefits of moving flower from cultivator to consumer through a CCA as medical cannabis rather than as adult-use cannabis.

The spreadsheet immediately below was the starting point for our August 6th article. This spreadsheet illustrates the division of the proceeds, including all taxes collected from consumers, of the retail sale of flower as adult-use cannabis through conventionally structured businesses. In this illustration we have assumed a sale of 250 packages of flower for $40 per 8-gram package. The $40 sale price includes the taxes collected from consumers. We have assumed a Local Cannabis Tax rate of 10.0% and a Sales Tax rate of 8.75%. The operating costs and profits of the dispensary, distributor and cultivator we have assumed are as stated in the spreadsheet below.

The $10,000 paid by the consumers for the packages of flower as adult-use cannabis through conventionally structured businesses will be divided among governmental agencies, and the dispensary, distributor and cultivator, as is reflected in the spreadsheet below.

The $10,000 paid by consumers for the flower as adult-use cannabis is divided as follows: (1) governmental agencies for taxes collected, both directly and indirectly, from consumers, 30.2%; (2) dispensary revenue, 27.6%; (3) distributor revenue, 20.4%; and (4) cultivator revenue, 21.8%.

In the spreadsheet immediately below, we have assumed the same 250 8-gram packages of flower are sold as medical cannabis to consumers at a price per package that produces the same gross revenue for the dispensary, excluding the taxes directly collected from consumers, as the sales reflected in the first spreadsheet. We have further assumed that the Local Taxes on sales of medical cannabis are 5.0% instead of 10.0%. Since medical cannabis is not subject to Sales Tax, the sale of the 250 8-gram packages for $8,827 will produce a gross revenue of $7,355 for the dispensary. The $7,355 of gross revenue for the dispensary is the same gross revenue for the dispensary as was generated by the sale of the 250 packages of flower for $10,000 as adult-use cannabis.

We have included the spreadsheet immediately above to illustrate the changes in the flow of funds caused solely by differences in the taxation of medical cannabis as compared to adult-use cannabis. The sale of the 250 packages of cannabis flower as medical cannabis provides the consumers with a 11+% discount even though the gross revenue of the dispensary, distributor and cultivator remain the same.

 

The basis for both of the preceding illustrations is an assumed sale by a cultivator to a distributor of one kilogram of flower at a price slightly over $1,100 per pound including Cannabis Cultivation Tax (“CCT”). The distributor assumes the CCT. The net to the cultivator is a little over $950 per pound. We assumed the cultivator has production costs of $1,410 per kilogram for the flower. These assumptions produce a before tax profit for the cultivator of $766 per kilogram. We have assumed the distributor has additional costs of $1,278 per kilogram, and a profit of $766 per kilogram. For the dispensary we assumed additional costs of $1,226, and a profit of $1,531, per kilogram. The additional costs and profit for the dispensary are based on 60% mark-up of the wholesale cost from the distributor.

 

The division of the sale proceeds between governmental agencies and the three cannabis businesses changes when the flower is sold as medical cannabis. The sale of the flower as medical cannabis significantly reduces the taxes collected from consumers. The allocation of the sales proceeds of $8,827 is: (1) governmental agencies, 16.7%; (2) dispensary revenue, 31.2%; (3) distributor revenue, 23.1%; and (4) cultivator revenue, 29.0%.

 

The costs, profits and income taxes of the dispensary, distributor and cultivator in the two preceding spreadsheets are the same. The sole difference in the preceding spreadsheets is the reduction in the taxes collected from the consumer when the flower is sold as medical cannabis. In both of the preceding illustrations we have assumed the cultivator and distributor each have a profit before taxes that is one-half of the profit before taxes of the dispensary. We have also assumed a 40% income tax rate is applicable to each of the businesses.

In the spreadsheet below we have assumed the same 250 8-gram packages of flower move from cultivator to consumer as medical cannabis through a fully integrated CCA. We have also assumed the operating costs for the dispensary, distributor and cultivator remain the same with the additional assumption any income tax liability of the dispensary is included in its costs. We have further assumed the profit to the cultivator is doubled through the use of a CCA. We have further assumed the reductions in costs and profits at the distributor and dispensary levels from the use of a CCA are passed on to the consumers.

The shifting of the amounts to which the tax rates are applied through the use of a CCA produces dramatic savings for the consumers. We saw this result with adult-use cannabis. The savings are more dramatic when medical cannabis is sold through a fully integrated CCA. In the preceding spreadsheet a total of $6.989, including Sales Tax and Local Cannabis Tax, is paid by the consumers for the same 250 8-gram packages of flower. The sale of this flower as medical cannabis drops the price per package to the consumers from $40 to $27.95. The total of $6,989 paid by the consumers for the flower as medical cannabis through a fully integrated CCA will be divided: (1) governmental agencies for taxes collected from consumers, 22.1%; (2) dispensary revenue, 17.5%; (3) distributor revenue, 18.3%; and (4) cultivator revenue, 42.1%.

The preceding illustrates why we have been touting CCAs since before this legislation became effective. The same packages of flower that cost consumers $10,000 as adult-use cannabis can be sold to the consumers as medical cannabis through a CCA for less than $7,000. California collects all of its CCT and Cannabis Excise Tax (“CET”), and local governmental agencies collect all local cannabis taxes. Best of all, the cultivators who grow the cannabis make twice as much money. This is the reason the Legislature created CCAs.

The use of a CCA to move extracted oil from cultivator to consumer as medical cannabis produces even more dramatic results than the movement of flower as medical cannabis.   We will shortly publish an article describing the financial benefits of moving oil from cultivator to consumer through a CCA as medical cannabis.


Sean HockingSean HockingAugust 27, 2019
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16min2680

If you wish to re-publish this story please do so with the following accreditation
AUTHOR:   aBIZinaBOX Inc. and Jordan S. Zoot, CPA
PUBLISHER:  CANNABIS LAW REPORT

On August 19, 2019, the Supreme Court of California issued a unanimous opinion in Union of Medical Marijuana Patients, Inc. (“UMMP”) v. City of San Diego. Except for the parties and the limited number of individuals who follow litigation involving environmental law, this case has moved through the California court system with little notice.

The real party in interest in the case is the California Coastal Commission. The City of San Diego was not particularly interested in the case even though its zoning actions relating to cannabis were the genesis for the lawsuit. The issue in this case involves the reconciliation of language in two sections of the California Environmental Quality Act (California Public Resources Code (“PRC”) §§21000 et seq. (“CEQA”)).

We decided to write a note on this case because the legal landscape relating to the interplay between CEQA and cannabis law in California has changed dramatically while this case was pending. It seemed to us an opinion by the California Supreme Court reversing a determination by San Diego relating to the impact of CEQA on the licensing of medical cannabis dispensaries must be significant for California’s cannabis industry. We were correct! The premise for writing this article was accurate. We find, however, we have far more questions than answers.

The California Supreme Court summarized the UMMP case as follows:

“In 2014, the City of San Diego (City) adopted an ordinance authorizing the establishment of medical marijuana dispensaries and regulating their location and operation. The central provisions of this ordinance amended various City zoning regulations to specify where the newly established dispensaries may be located. Because the City found that adoption of the ordinance did not constitute a project for purposes of CEQA, it did not conduct any environmental review. Petitioner Union of Medical Marijuana Patients (UMMP) challenged the City’s failure to conduct CEQA review in a petition for writ of mandate, which was denied by the trial court.”

The key word in the California Supreme Court’s explanation of the case before the Court is “project.” CEQA broadly defines “project[1]” and then relieves those who are responsible for developing a “project” from the necessity of the preparation of an Environmental Impact Report through a Negative Declaration. CEQA is an issue for California’s cannabis industry, and the significance of this case extends far beyond California’s cannabis industry, because “project” has a far broader meaning for the purposes of CEQA than the common meaning of the word.

All our readers will agree that building a coliseum or a shopping center is a project. The rehabilitation of a building may or may not be a project in the minds of most of our readers. Most of our readers would agree that whether or not the rehabilitation of a building is a project depends on the size of the building and the extent of the work required for rehabilitation. The word “project” has a far broader meaning for the purposes of CEQA than the meaning of the word in common usage, but questions relating to size, scope and impact discussed at the beginning of this paragraph remain relevant.

The adoption of ordinances and regulations by governmental agencies may fall within the definition of a “project” for the purposes of CEQA. In fact, this was the issue that caused San Diego’s adoption of changes to its zoning ordinances in 2014 to allow a limited number of medical marijuana dispensaries in certain locations to end up before the California Supreme Court. San Diego did not conduct an environmental review in connection with these zoning changes. San Diego erroneously determined that CEQA did not apply to the zoning ordinance changes that it adopted to allow for medical cannabis dispensaries.

UMMP challenged San Diego’s failure to conduct a CEQA review in connection with adoption of the zoning changes. The trial court upheld San Diego’s determination a CEQA review was not required. UMMP appealed to the Court of Appeal The Court of Appeal affirmed the decision of the trial court. UMMP appealed to the California Supreme Court. The California Supreme Court reversed the decision of the Court of Appeal, and remanded the case back to the trial court. The trial court was instructed to conduct further proceedings relating to whether an environmental review was required in connection with San Diego’s changes to its zoning ordinance based on the Court’s refinement of the meaning of “project” for the purposes of CEQA.

We need to address a tangential issue before discussing the application of this case to cannabis. The opinion in the UMMP case involves the definition of “project” for the purposes of CEQA. That the ordinances in issue related to cannabis are incidental. The question before the Court in the UMMP case was whether San Diego had erroneously concluded a CEQA review was not required in connection with changes to its zoning ordinances. Many cities in California are considering amending zoning ordinances in connection with the licensing and regulation of electric scooters. Medical cannabis dispensaries and electric scooters are equivalent for the purposes of the UMMP case.

We are writing about this case in connection with California’s cannabis industry because so much has happened in California’s cannabis industry while this case was pending. It is our understanding San Diego has amended its ordinances relating to cannabis on multiple occasions while the UMMP case was pending. Did San Diego act properly under CEQA in adopting its post-2014 zoning ordinances changes relating to cannabis? We suspect solely the attorneys for San Diego can answer that question. We doubt they have as yet even considered this question. We will boldly suggest that our comments in the balance of this article may be of some modest assistance in answering such a question.

Do the changes in the law relating to cannabis that has occurred while this case was pending render the California Supreme Court’s opinion in the UMMP case irrelevant to California’s cannabis industry? We can readily answer this question. CEQA has not changed significantly over the past five years. California’s cannabis laws have changed significantly. As a consequence, the California Supreme Court’s opinion in the UMMP case cannot be irrelevant to California’s cannabis industry. Any determinations regarding the application of the opinion in the UMMP case to California’s cannabis industry have been made far more difficult as a consequence of the changes in California’s laws relating to cannabis during the past five years.

At least three significant complications to the application of the opinion in the UMMP case as a consequence of the changes that have occurred during the past five years in California law relating to cannabis come immediately to mind.

San Diego changed its zoning ordinances to provide for the licensing of medical marijuana dispensaries. Proposition 64 legalized adult-use cannabis. Proposition 64 also preserved the rights granted to California residents under Proposition 215. The Medical and Adult-Use Cannabis Regulation and Safety Act (“MAUCRSA”) adopted a combined regulatory scheme for medical and adult-use cannabis based on Proposition 64.

Is medical cannabis identical to adult-use cannabis for the purposes of CEQA? Before you attempt to answer this question, consider that medical cannabis and adult-use cannabis are the same in the hands of a cultivator for the purposes of CEQA, but the delivery of medical cannabis through a legal collective may be different from the sale of adult-use cannabis through a dispensary for the same purpose.

As is obvious from the UMMP case, CEQA applies in some instances to the actions of local governmental agencies in their adoption of ordinances and regulations. CEQA also applies to the adoption of regulations by agencies of California. The Bureau of Cannabis Control (“BCC”) avoided the preparation of an Environmental Impact Report through the adoption of a Negative Declaration.

In a very simple sense, the Negative Declaration was justified by the premise that BCC and the other cannabis regulatory agencies would quickly license California’s cannabis industry and the environmental issues would all be properly addressed at a local level. Some of the premises for BCC’s Negative Declaration have proved inaccurate. Of what value is a Negative Declaration if the legislature and the agency regularly adjust the premises?

Many of the actions of local agencies in the last five years relating to cannabis were taken in reliance on an exemption from CEQA that Proposition 64 added in Business and Professions Code (“B&P”) §26055(h). The Legislature extended this provision to July 1, 2021. This provision was originally set to expire July 1, 2019.

The first sentence of B&P §26055(h) states,

“Without limiting any other statutory exemption or categorical exemption, . . . [CEQA] does not apply to the adoption of an ordinance, rule, or regulation by a local jurisdiction that requires discretionary review and approval of permits, licenses, or other authorizations to engage in commercial cannabis activity.”  

By its express terms, B&P §26055(h) is limited to local agency actions.

This exemption is likely far narrower than many have supposed as a consequence of its second sentence. The second sentence of B&P §26055(h) states,

 

“To qualify for this exemption, the discretionary review in any such law, ordinance, rule, or regulation shall include any applicable environmental review pursuant to . . . [CEQA].” [2]

This language appears to describe the error that San Diego made. The California Supreme Court has concluded San Diego made an erroneous decision regarding the “applicable environmental review” required in connection with the amendment of its zoning ordinances.

The UMMP case significantly expanded the opportunities for filing meritorious lawsuits. A number of California cities and counties have amended their zoning ordinances during the past five years in response to pressures from the cannabis industry. Some – perhaps many – of these actions are likely to be open to question-based on the opinion in the UMMP case.

We believe one definite conclusion can be drawn from the opinion in the UMMP case. We believe it is a certainty some members of The State Bar of California will view this opinion as a financial stimulus package. We have a myriad of additional questions. We are confident California lawyers will soon begin asking and answering many of our questions.

[Note – while this isn’t directly relevant to this article, we located a significant number of CEQA related reports and documents that are going list and link merely to provide a location to find them quickly in the future.

CEQA Exemption Petition, Form BCC-LIC-026

CEQA Project-Specific Information, Form BCC-LIC-025

CEQA Overview Presentation – Bureau of Cannabis Control

Finding of facts

[1] Sec. 21065

[2]


Video StaffVideo StaffDecember 13, 2018

1min4960

Humboldt County in California has seen its fair share of boom and bust cycles. From gold mining to logging, this county continues to reinvent itself. Now it’s cannabis that is fueling the county and specifically the town of Eureka’s latest boom. Rob Holmlund, the Director of Community Development in Eureka California tells the Green Market Report how the area has been transformed by the cannabis industry that has brought meaningful jobs to the residents.


William SumnerWilliam SumnerDecember 12, 2018
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4min14280

Earlier this week, the cannabis technology platform LeafLink released its 2018 Wholesale Cannabis Pricing Guide and the company learned that Alaska and Maryland are the two most expensive states to buy legal cannabis, followed by Nevada and California.

Examining the wholesale landscape of some of the most mature cannabis markets in the United States, the guide looks at the average wholesale price of cannabis in eight states: Alaska, Arizona, California, Colorado, Maryland, Nevada, Oregon, and Washington. The product types covered by the report include concentrates, cartridges, edibles, flower, and pre-rolls.

Although the report does not dive into the specifics of why one state is more expensive than another, the authors speculate that the Alaska and Maryland’s high prices are due to the states having a low number of cannabis cultivators. In the two states where cannabis is cheapest, Washington and Oregon, there is currently a glut of cannabis cultivators; leading to low prices and oversupply.

“As the standard wholesale marketplace for the industry’s leading brands, we are able to provide crucial market information to cannabis retailers and brands, which will help inform their plans for 2019,” said LeafLink Co-Founder and CEO Ryan G. Smith in a statement. “As more states like Massachusetts, Connecticut, Pennsylvania, and Michigan continue to establish wholesale operations, we will be able to provide a larger scope of market activity to further empower the LeafLink community, as well as the industry at large.”

Nationwide, the average price for a pound of cannabis flower is $2,124 per pound, while a gram of pre-rolls costs around $5.66 per gram. The average price for cannabis concentrates costs approximately $26.07 per gram and cartridges are priced at around $39.55 per gram. Edible cannabis products, on average, cost around $0.20 per milligram.

When taken on a state-by-state level, cannabis prices start to vary. With regards to cannabis consumer preferences, the report found that consumers prefer products in the lowest 25% price range. The exception to this was pre-rolls. On average, consumers preferred pre-roll products in the 25%-49.99% price range.

The report also examined the relationship between pricing and discounted sales. On average, approximately 16% of the products sold through LeafLink’s platform have a discounted price. Across all eight states examined, discounted products generated 3% more sales than regularly priced products.

The discount effect is magnified when combined with larger sales campaigns. During the last year, LeafLink ran two sales promotions, one in the month leading up to 4/20 (dubbed 3/20) and one in July called 7/10; which is a considered an industry-wide “holiday” for concentrates.

When combined with those larger sales campaigns, discounted products generated 37% more sales on 3/20 and 38% more sales on 7/10. This seems to suggest that cannabis retailers stand to significantly boost their sales numbers by combining sales promotions with discounted cannabis products.


Debra BorchardtDebra BorchardtAugust 20, 2018
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4min13180

The state of California released its tax data for Q2 cannabis sales last week.  Tax revenue from the cannabis industry totaled $74,240,257.00 million from April 1, 2018, through June 30, 2018, which includes state cultivation, excise, and sales taxes. It does not include tax revenue collected by each jurisdiction.

According to GreenWave Advisors, that means that the implied recreational retail revenues increased 36% to ~$290M from $213M in Q1.  In addition to the retail revenues, the implied wholesale revenues would have reached roughly $29.9M vs $10.7M quarter-over-quarter.  “We note while these results fall below expectations, it does not include medical marijuana sales in which sales and excise taxes are excluded,” said Matt Karnes, the founder of GreenWave Advisors.

The California Department of Tax and Fee Administration also noted the excise tax on cannabis generated $43,490,668.00 million in revenue during the second quarter of the calendar year 2018. The cultivation tax generated $4,482,119.00 million, and the sales tax generated $26,267,470.00 million in revenue.

California cannabis retailer MedMen (MMNFF) said on Monday that its stores accounted for roughly six percent of all legal retail sales of cannabis and cannabis products in the second quarter for the state. MedMen said in a statement that its eight stores represent about two percent of all retailers, meaning on average MedMen stores outperform non-MedMen stores by a factor of three.

“The strong growth in tax revenue in the second quarter of the year shows that the legal cannabis industry is delivering on its promise of economic activity and greater public resources to the people of California,” said Adam Bierman, MedMen chief executive officer, and co-founder.

While MedMen is clearly happy with its results, the actual tax receipts are far lower than what the state had projected in the budget proposals. Governor Jerry Brown had estimated that the state would pull in $175 million in the first six months and instead the number was $135.1 million.

GreenWave went on to add that approximately 100,000 medical marijuana cards have been issued by the state since 2004 so Karnes believes that total retail sales are likely considerably much higher with med marijuana included and he estimates that its near $700M  for the first half of the year.

“As the regulated market in CA continues to evolve, it will likely experience ongoing sales pressure in the near term.  However, we remain optimistic that these “growing pains” will ultimately be resolved to achieve a $7B retail market over the next 5 years,” said Karnes. He went on to add that the average revenue per dispensary for the first half of the year is roughly $300,000 per month.

At the end of June, there were approximately 64 medical only licenses representing 15% of the market and 331 licenses for outlets selling both medical and recreational. At that time there were only 21 recreational only licenses representing 5% of the market.


Jack SmithJack SmithAugust 8, 2018
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4min18380

Despite the overwhelming majority of Californians being happy with the legal cannabis market, there is still a significant percentage of residents who buy marijuana illegally, due in large part to high taxes on the substance.

A new report from Eaze Insights shows that 84 percent of Californians are “satisfied” with the legal marijuana market, but approximately 20 percent have purchased illegal or illicit marijuana in the past three months. Concerning to regulators and the state’s finances is that 84 percent of that segment of the population is “highly likely to repeat that behavior in the future due to the illicit market having cheaper products and no tax.”

Part of the concern is that although consumers would like to purchase marijuana legally if, given the option, the taxes are a major concern for many consumers. According to the California Department of Tax and Fee Administration, marijuana has a 15 percent excise tax, though recent reports have suggested the state is looking at cutting taxes as a way of driving legal means of consumption.

Approximately 85 percent of Californians have purchased cannabis from “unlicensed sources,” but most of them cited factors such as lower prices and a lack of taxes for the reasons those purchases were made.

Other consumers say they have purchased from illegal marijuana vendors because it’s “hard and time-consuming” to find legal businesses. Approximately 1 in 7 respondents said it was “not easy to identify licensed cannabis businesses.”

Although the picture has been painted with some negative brushes, there are changes that can be made that will positively affect California’s burgeoning weed economy.

If taxes were decreased by 5 percent, that could drive much of the illegal market into the legal market, Eaze notes. The town of Berkley took that initiative early on when it lowered its city tax on cannabis from 10% to 5%.

“A 5% decrease in the overall tax rate in CA could bring twice as many CA consumers to only purchase cannabis from licensed businesses (from 16% to 32%),” Eaze wrote in an email obtained by Green Market Report. “Conversely, a 5% increase in the overall tax rate in CA would drive twice as many CA consumers to only purchase from unlicensed businesses (12% to 23%).”

Use cases in the state include wellness (treating or coping with illnesses such as cancer) and consumers are increasingly becoming more sophisticated in the types of cannabis they consume.

“They care the most about consistent product quality,  fair pricing, packaging, safe access and a great customer experience, the same way they care about those things for more traditional consumer products,” the email obtained by GMR said.


William SumnerWilliam SumnerApril 24, 2018
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3min14380

The world of mergers and acquisitions is heating up in the state of California as two cannabis companies today announced a pair of high priced acquisitions.

First, Golden Leaf Holdings (GLH) announced that is has signed a letter of intent (LOI) to acquire a cannabis dispensary in northern California. Included in this transaction are all of the dispensary’s assets; such as licenses and permits for cannabis cultivation, production, manufacturing, distribution, and retail. Under the agreement, Golden Leaf will pay $1.25 USD million upfront in cash, an additional $500,000 in stock, and earn-out payments of up to $8 million based on future revenue thresholds. This transaction will mark Golden Leaf’s first entry into the U.S. market.

“Signing this LOI is another key strategic step forward for Golden Leaf, as we continue to execute on our plan to introduce our retail brand-focused model to the largest growth markets, both in the U.S. and internationally,” commented William Simpson, CEO of Golden Leaf, in a statement.

Also announcing a major acquisition today is Cannabis Strategic Ventures, Inc., which just completed the definitive agreement to acquire Worldwide Staffing Group, Inc. The company will acquire 100% of Worldwide’s issued and authorized shares and begin recognizing Worldwide’s revenue, which reached $1.5 million in 2017, upon the closing of the transaction.

Worldwide will continue to operate as an independent wholly owned subsidiary, providing employment and staffing services that are not related to the cannabis industry. However, the company will use Worldwide’s experience to eventually expand into cannabis industry staffing, particularly in the California market.

“The job demands in the Cannabis Sector are expanding into other job functions beyond the traditional Bud Trimmers and Bud Tenders. This acquisition better prepares us to meet the growth we are expecting through the end of this year, into next, and beyond,” stated Simon Yu, CEO of Cannabis Strategic Ventures. “We welcome Worldwide Staffing into the Cannabis Strategic portfolio.”



About Us

The Green Market Report focuses on the financial news of the rapidly growing cannabis industry. Our target approach filters out the daily noise and does a deep dive into the financial, business and economic side of the cannabis industry. Our team is cultivating the industry’s critical news into one source and providing open source insights and data analysis


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