California hopes to rake in $1 billion in annual tax revenues from cannabis sales, and nowhere is that more clear than at dispensary cash registers.
It’s sticker shock for marijuana customers since Jan. 1, when clerks began adding a whole slate of new taxes to both medical and nonmedical pot purchases. Industry experts have estimated the new tariffs — cultivation, excise and sales taxes — add up to a 40 percent increase in the cost of pot this year versus 2017.
“The taxes are too high,” said Erich Pearson, executive director of SPARC dispensaries in Sonoma County and San Francisco. “It’s all passed on to the customer at the end of the day.”
Marijuana prices are expected to plummet in California once large-scale cultivation and manufacturing production gets underway and the above-board supply expands. But it could take a year or more for supply to drive prices down.
At SPARC’s dispensary Tuesday on North Dutton Avenue in Santa Rosa, contractor Jesse Knapp paid $120 for several varieties of cannabis flowers and edibles like chocolates, which he guessed would have cost him about $30 less in 2017.
He didn’t have a state-issued medical marijuana patient card. The cards — which are different from a doctor’s recommendation — allow a customer to avoid paying sales tax, an allowance designed to help truly ill people avoid some of the costs associated with the new recreational marketplace.
SPARC in Sebastopol began adult-use sales Jan. 1 and its Santa Rosa store has permission from the city to begin adult-use sales once it receives a state license to do so, which could arrive any day. In Santa Rosa, the variety of flower choices — several dozen in jars displayed in glass cases with names like Golden Lemons and Blue Cheese — are the same as last year but the price tags are higher, said Jessi Flagg, SPARC’s assistant dispensary manager.
The base prices include the state’s new 15 percent excise tax, which is calculated based on the wholesale price.
Then they add 8.625 percent sales tax at the register and Santa Rosa city’s 3 percent cannabis tax.
“Oh my gosh, yes, a lot of people are asking (about taxes),” Flagg said.
Several customers shrugged off the higher receipt totals, saying it’s an acceptable trade-off if the industry is able to face fewer legal obstacles and serve more people.
“I’m glad more people will have access (to marijuana), but it’s going to come at a cost,” said Knapp, 33, of Santa Rosa.
A man leaning heavily on a cane sighed deeply when asked about the increased cost.
“Any time you end prohibition, there will be real spikes,” said the man, who only gave his first name, Robert.
“I imagine it will all work out in the end.”
Late last year, Mercy Wellness in Cotati sent a flyer to its customers alerting them to the impending price changes. It is adding the excise tax as a line item on the sale, rather than folding it into the base price for the product, said dispensary owner Brandon Levine.
The poster showed two receipts: A $25 eighth of an ounce of flower purchased on Dec. 31, 2017, is charged $3.11 in sales tax for a total of $28.11.
On Jan. 1, 2018, the total price jumped 42 percent to $39.93. That includes a $4.67 excise tax, $3.26 sales tax, plus the $0.93 city tax.
At Alternatives Health Collective on Hampton Way in Santa Rosa’s Roseland neighborhood, owner Karen Kissler said they haven’t yet raised their prices because the excise tax is calculated based on the wholesale price for that particular item, a constantly shifting figure based on inventory, and they haven’t yet installed the software capable of doing it.
She’s also reluctant to raise prices because their location in Roseland has drawn a loyal, working-class membership.
Kissler said the business is eating the cost for now, but she expects to raise prices once they start adult-use sales. Like SPARC, they have received permission from Santa Rosa and are waiting for the state license.
“We have a strong patient base that just can’t afford higher prices, but they will have to figure out a way to afford it,” Kissler said. “I can’t see a way around raising our prices.”