California AB 1420 And Why Cannabis Licensing Fees Should Be Standardized
It’s important to us at NUGL that our readers are updated on the most current and pressing policy issues affecting the cannabis industry. Cannabis legislation in California has kept the industry in limbo as regulators promise to iron out wrinkles in state laws created by Proposition 64. Although Proposition 64 legalized recreational cannabis consumption in California, there are still roadblocks for businesses to overcome if they want to thrive in the legal market.
Current policy efforts aimed at addressing the underlying issues facing cannabis businesses reside in Assembly Bill 1420, which was introduced by Assemblymember Obernolte (R – 33 High Desert) in February 2019. Once passed, this bill would effectively fix licensee fees at a set cost and require either the State Department, Department of Consumer Affairs, or Department of Agriculture to provide justification to the legislature for fee increases on Commercial Cannabis Operators — a safeguard that all industries, except cannabis, already enjoy.
Although AB 1420 has largely flown under the public’s radar, the bill represents a seismic shift for cannabis operators in the state. In fact, it’s a big part of ensuring accountability by forcing our state agencies and departments to reign in governmental overregulation and encroachment on economic freedoms.
The need for a bill like AB 1420 could not be more clear, as cities have taken full advantage of the exorbitant licensing fees, often exceeding $10,000 to attain. When coupled with the massive startup fees required to get a new cannabis operation off the ground, licensing fees can actually debilitate small business owners seeking to enter the market.
Legislators intend the bill to offer operators and business owners in the industry some stability in the face of excessive and unforeseen expenses, such as increased fees and ill-conceived changes to regulations.
The bill was ordered by the Chair of the Senate Standing Committee on Appropriations to be suspended following opposition from the Department of Consumer Affairs and the Department of Food and Agriculture. Why is the bill facing opposition at a time like this — particularly when it’s clear that more oversight and fee standardization can be good for both business owners and consumers?
Across the board, cannabis operators are taxed up to 500 times higher than even the alcohol industry, which is at 40-78 percent on a state level. Cannabis businesses are left to struggle with overhead expenses that, due to IRS 280 E, are not deductible and are taxed at a national rate of 80 percent.
At the end of the day, uncontrolled licensing costs hurts owners and the patients they serve. For owners, this may mean bearing a heavier financial burden and it also means transferring the costs to patients via price hikes. Consequently, this may further fuel the illegal market.
If we cannot get a regulatory fix to this issue passed this year, we are failing not only ourselves, but we are also failing cannabis consumers and the California cannabis market as a whole.
When citing problems with California’s legal market, some point the finger at legislators for their slow and piecemeal attempts to balance the cannabis industry ecosystem. The reality is that the burden does not fall on the state legislature alone!
As a matter of fact, the legislature is doing its best to get a grip on the situation while trying the find remedies and solutions that provide the best oversight. No singular department is to blame, either. They’ve done what others in the past have failed to do — rally together and work to finally take a position.
Industry leaders are weighing on the issue.
“From our unique position in the cannabis industry, Naturetrak has witnessed the carnage of smaller boutique operators due to licensing fees first hand,” stated by Ron Brandon Chief of Staff for Naturetrak. As an all in one compliance platform, Naturetrak can observe the ordeals in detail. As Brandon says, “these smaller operators who once created jobs for locals in their area are now scaling back operations costs by laying off those same people just to turn a profit. I have friends who haven’t paid themselves in over a year.” In their letter of support for AB 1420 they further declared through these observations that “this can all be fixed by lowering licensing, and associated fees. As an operator myself, I understand the pain of running a cannabis business shorthanded, both financially and understaffed.”
What has actually become the crippling pain point of the situation is the lack of collaboration and communication across the community, industry, and government.
“We have done a lot in ten years but, as is the case now, more than ever, it takes a village. And as it stands, we have everything we need. But we are starving ourselves,” stated Ryan Bacchas, Chairman and President of the California Cannabis Coalition.
“As many know, we were one of the only organizations to say ‘No’ on Proposition 64, just as we did with Proposition 19 in 2010. This is exactly why.
“Clearly, regulations in California have been known to go against the interests of citizens and business owners in the past years — hence the gas, soda, and tampon taxes that exist in our State. There was no way Cannabis [was] going to be any different. Now we have to protect our operators from expense increases just to obtain and renew licenses when they do [expire].”
Together, we can protect the interests of patients and business owners. We can make a huge impact by taking the small step of standardizing licensing fees and providing a big lift to operators across the state.
For information, or to sign and send in your Letter of Support, contact the California Cannabis Coalition at (424) 290-9908 or email them at [email protected].