California Cannabis Industry Gets Lifeline From State In Wake Of COVID-19 Pandemic

Southern California cannabis growers sued over odors
Southern California cannabis growers sued over odors

California’s Cannabis Industry, already impacted by high compliance costs and taxes, could get a lifeline from the state government approved to help businesses survive the COVID-19 pandemic.

The lifeline could be a mix of extensions, relief and deferrals to help cannabis companies keep operating and meet payroll, industry officials said. The aid also could include lowered or suspended taxes.

The California Department of Tax and Fee Administration, The office of Tax Appeals and the Franchise Tax Board have come up with these more business friendly initiatives in the wake of Gov. Gavin Newsom declaring a state of emergency in March.

  • Extending state tax return filings and payments under $1 million to July 31.
  • Relief from tax interest and penalties.
  • A 60-day extension to file refund claims, annual fees, installment payments, annual reports and audits.
  • A 60-day extension to July 31 to request tax appeals.
  • A 12-month sales and use tax deferral of up to $50,000 for businesses under $5 million in annual taxable sales.
  • An extension to July 31 to file first-quarter taxes for businesses under $1 million in annual taxes.

Humboldt Growers Network, like many marijuana companies in California, is behind on state tax payments.

Here’s how assistance works

Humboldt Growers Network expects to have its payment plan and taxes deferred as well as its penalties erased. Instead, the money now goes to expansion and hiring, as well as gaining compliance with the California Department of Fish and Wildlife regarding agricultural zoning and licensing.

Concerns over California economy

Bryce Berryessa, owner of Santa Cruz cannabis retailer Treehouse and president of Watsonville-based manufacturer and distributor La Vida Verde, said prolonged revenue shortfalls could occur if economic conditions worsen and more people lose their jobs.

He said he’s grateful state agencies are providing relief, but he wants to see more steps taken to drive legal prices down so they’re on par with illegal operators. Berryessa also said “onerous taxes” at the state and local levels must be dealt with.

Possible bridge loans

State Treasurer Fiona Ma said during an April 3 industry webinar that cannabis companies might also be eligible for a bridge loan of up to $50,000. Gov. Newsom announced that plan April 2 when he also declared a 12-month reprieve of the state sales tax.

Even with these changes, cannabis companies still face major hurdles getting bank loans and have not yet been able to get the federal funds, bailouts, stimulus packages and grants approved by Congress under the CARES act – to battle the business fallout from the COVID-19 mandatory business shutdowns.

California, the world’s largest cannabis market, started the year overburdened with compliance issues, steep tax rates, high real estate costs, massive devaluations and fierce competition from black market growers and sellers. While mass consolidation was expected this year, the COVID-19 pandemic and the drastic impact on the state’s economy will likely produce irrevocable changes to the state’s legal marketplace, established just two years ago.

“2020 is really going to be a cleansing of the industry … and bringing in more viable companies,” said George Sadler, president of San Diego-based Platinum, a cannabis products manufacturer and distributor.


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