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Yesterday California Governor Gavin Newsom signed AB-195, eliminating the state’s hated cultivation tax, which forced licensed growers to pay $161 in taxes per pound of cannabis produced.

AB 195 is an omnibus budget trailer bill that includes a number of measures intended to reform the California industry’s notoriously terrible tax structure. In addition to eliminating the cultivation tax, the new law will eliminate an automatic tax increase which would have taken effect in 2024, provide some additional tax relief for social equity operators, shift the separate 15% excise tax collection point from distribution to retail, and bolster enforcement against unlicensed operators. (For example, property managers who “knowingly” rent or lease to unlicensed operators can now be fined up to $10,000 per violation, per day. The law also gives county governments more power to take action against unlicensed cultivators over water pollution or diversion.)

The legislation is also a win for labor: now a business with only 10 non-management employees can be required to enter into a labor peace agreement. (The previous number was 20.)

To get some local perspective, we reached out to Vince Ning, founder and co-CEO of Nabis, for comment.

“The passage of AB-195 is a watershed moment for the cannabis industry in California,” Ning said. “The elimination of cultivation tax puts more hard earned dollars back in operators’ pockets in a time of economic difficulty. The shift of excise tax responsibility will remove a plethora of administrative overhead of operators as well, given retailers will now be able to directly pay excise taxes to the state. There is still a long road ahead to iron out kinks in the industry, but today we celebrate the few major wins we can get in the industry that still has so much potential. We are proud to have worked alongside the best operators across all sectors of the industry to get this tax reform bill passed through the legislature and signed by the governor.”

Vince isn’t exaggerating about the long road ahead. This is probably a case of too little too late when it comes to California’s troubled industry, but in these trying times, we’ll take what we can get. Congratulations to everyone who fought so hard for these reforms.

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