California Cannabis Industry Fears a Big Crash Soon

Unpaid debts and taxes could lead to pot store shutdowns
By Steve Huff,  Newser Staff
Posted May 20, 2023 12:55 PM CDT
California Cannabis Industry Fears a Big Crash Soon
Marijuana plants are shown at California Cannabis Company.   (AP Photo/Jeff Chiu)

The massive cannabis industry in California is in real peril, with one industry vet telling SF Gate that an "extinction event" is on the horizon. A number of marijuana dispensaries are in danger of closing due to mounting debt and missed tax payments, according to the outlet. While the state's cannabis industry has long faced debt issues, recent legislative changes have raised the pressure on pot shops by shifting responsibility for marijuana excise taxes from distributors onto sellers. Those taxes came due on May 1, and about 265 shops failed to make a payment, which means penalties will start piling up.

"I’ve seen a lot of cycles, but this will have a real impact," the owner of San Francisco cannabis manufacturer Sunset Connect tells SF Gate. "The extinction event is when the government wants its taxes, and no one can pay it," says Ali Jamalian. Additionally, Democratic Assemblyman Phil Ting is proposing a bill to aid cannabis suppliers that haven't been paid by stores selling their products. In a press release, Ting explained that federal restrictions have long "left our state's legal cannabis operators with limited options for financing and capital. This has led to a severe debt bubble across the supply chain from cultivators all the way through to the retailers."

The industry isn't sitting back, though. MJ Biz Daily reports that several brands in the cannabis business have formed the Financial Stability for California Cannabis (FSCC). The coalition sent a letter to Democrat Chris Holden, chair of the Assembly appropriations committee, in support of a bill that would be the first credit law in the United States for weed sales. (More cannabis stories.)

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