In California, it is apparent that the Cannabis Rules and Regulations to start a business have not yielded the funds California was expecting.
State officials also predicted that legal cannabis would eventually bring in up to $1 billion in revenue a year. But with many cities banning pot sales, tax revenue is falling far short of estimates. Based on taxes collected since Jan. 1, the state is expected to bring in $471 million in revenue this fiscal year — much less than the $630 million projected in Gov. Jerry Brown’s budget.
Less than 20% of cities in California — 89 of 482 — allow retail shops to sell cannabis for recreational use, according to the California Cannabis Industry Assn., and only 33% allow any type of commercial cannabis activity.
The fact of the matter is that this industry is over regulated, over taxed and misunderstood. Even though the citizens of certain cities voted for Prop 64 by more then 50%, those cities’ City Council members are going against the will of the majority.
The manner in which this has all been laid out makes it extremely difficult to enter the market. Someone who wants to go into any of the cannabis businesses within the supply chain (Manufacture, Cultivation, Distribution, Retail and Testing) must first secure property (leased or purchased) in an area zoned for that particular activity. Then they must go through the licensing process which can include non-refundable application fees which range from $1000 up to $80,000. The cost of putting an entire application package together is enormous and there is no guarantee you will get that City Permit. If you do get a City Permit then you, and only then, can you apply for the State License.
What is the application fee to the state you ask? $1000.00
What is the annual license fee to the state you ask? That depends on what your gross revenue is. But wait, you have not started to operate yet. You cannot operate until you get the State License and the State wants to project what your first year of revenue will be. Depending what the number is, you will land on a sliding scale from $5000 to $1,000,000 or more for the annual license fee which must be paid up front before the license will be issued. Most people think they can just lowball the number so they pay a $5000 annual license fee. If you do that, when the year ends and you made so much that you should have paid a $100,000 fee, the state will make you pay the $95,000 that was short, PLUS an additional penalty of 50% of what should have been paid which would be another $50,000.
IF WE MADE THE CANNABIS LAWS it would be very simple. We suggest regulations that allow for an open and free market. If you can make a good product you should be able to get started and survive. If we made the Cannabis Laws we would allow people to apply for small business permits to operate certain activities out of there home (like many small home-businesses). The application fees would be standardized, fair and affordable. Every city would have to permit cannabis businesses. We fully support the California Cannabis Hemp Initiative (CCHI), which aims to do these things. This initiative will completely free the CANNABIS. However, it is a grassroots campaign and needs the entire cannabis community to come together. That may be a far fetched fantasy considering the competitive nature of the black market vs the legal market. Frankly speaking, if the black market spent money on supporting CCHI instead of bling, cars, booze and parties, we might just be able to get it done.