California’s new regulations and taxes for recreational marijuana, legal as of January 1, are a threat to the Emerald Triangle cultivators and dealers who have dominated marijuana for almost five decades.
California’s total annual production of “weed” is about 13.5 million pounds, with about 11 million pounds, or 81 percent, exported out of state, according to ERA Economics.
The Emerald Triangle, the Northern California area that produces 60 percent U.S.-grown marijuana, includes Mendocino County, Humboldt County, and Trinity County. Although there is little data regarding the number of Emerald Triangle growers, ERA Economics identified 10,000 cannabis grow sites in Humboldt County in 2017.
Under the voter-approved Proposition 64 of 2016, which legalized recreational marijuana, the California Bureau of Cannabis Control (BCC) was established as “the lead agency in developing regulations for medical and adult-use cannabis in California.” Six BCC regulatory licensing departments require detailed data regarding individuals involved in cultivation, manufacturing, distribution, retail, testing and microbusiness.
As part of the regulatory structure, recreational marijuana and hemp sales are subject to a California excise tax rate of 15 percent on sales, plus a cultivation tax of $9.25 per ounce for flowers, and $2.75 per ounce for leaves. At a $6.6 billion sales level, the State of California expects to collect over $1 billion in in new taxes in 2018.
Humboldt County estimated that its local cities would collect $7.3 million because Prop 64 allows them to add on an additional 25 percent local excise tax. But the Eureka Times-Standard reported that Prop 64’s local and state taxes have raised the price for an eighth of an ounce for high-quality marijuana by $20 to $50 — a 67 percent price increase.
Another negative for the Emerald Triangle marijuana industry is the California Department of Fish and Wildlife’s new raids to eradicate marijuana farms that are not complying with environmental restrictions on uses of water, fertilizer and animal habit. During October, California Fish and Wildlife wardens burned at least 15 major grow sites in the Emerald Triangle.
Some publications claimed that the City of Eureka’s two recreationally licensed dispensaries, Humboldt County Collective and EcoCann, did a roaring trade on Jan. 1. But SFGate.com only photographed 1 customer in line at EcoCann’s 7 a.m. opening.
With only 2,300 Humboldt County farms and businesses having applied to the BCC for cannabis business permits to grow and sell marijuana legally, the black market seems set to continue dominating the industry.