New Taxes Drive California Marijuana Prices Sky High

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The State of California is almost ready for the start of recreational marijuana sales on January 1, 2018, however, there are still a few pieces of vital information that are not clear. One of those missing pieces is the final local tax rate for marijuana growers, manufacturers, and consumers.



A report from Fitch Ratings is predicting that the combination of state and local taxes will amount to around 45% of the total sale of recreational marijuana product. 15% of the tax will go to the state, 10% will go to the city, and then there is the standard sales tax, which is normally around 10%.

This amount of tax gives the black-market a fighting chance within the marijuana industry because it forces people to find others ways to get the product in order to make it affordable and reasonable.

From a business and dispensary owner standpoint, owners will have to resort to cutting costs some way or another in order to make prices reasonable to consumers. From a consumers standpoint, some people may be more likely to purchase marijuana off the streets because they do not have to pay the high tax rate.

The report itself warned readers that, "The existing black market for cannabis may prove a formidable competitor to legal markets if new taxes lead to higher prices than available from illicit sources.”

With California being such a large state, marijuana dispensaries and manufacturers are predicted to generate around $1 billion in sales tax within the first year for recreational marijuana sales.

That sounds like a great amount to start out with but, come January, we will see how the prices of marijuana and sales tax effect the purchase rates and Black Market.