California cannabis industry says it's been pushed to 'breaking point'

Several of the California's leading cannabis companies have banded together to direct a dire warning to Gov. Gavin Newsom this week. In a letter sent to the governor’s office and leaders of the state legislature, business leaders warned that the state’s legal cannabis industry is on the verge of collapse.

"It is an emergency," said David Goldman, who sits on the board of the San Francisco dispensary, The Green Cross.  

Goldman is among the hundreds who have added their signatures in support of the letter, Save California Cannabis Industry, on the site

"We need you to understand that we have been pushed to a breaking point," states the letter.

"It’s not just our dispensary, it’s every dispensary that is facing this exact problem," said Goldman.

Industry leaders behind the letter say the challenges that the industry is currently face are directly tied to how it is being regulated and taxed in the state. 

Goldman says that high taxes make it incredibly challenging for the regulated cannabis industry to compete with prices being offered by illegal underground markets.

"If we don’t get in front of this tax issue. It’s going to roll right over us in the state and it’s happening quickly," agreed Michael Koehn, who sits on the leadership of the Brownie Mary Democratic Club of San Francisco, a group that advocates for medical cannabis patients. 

Goldman says the underground market allows illegal suppliers to offer cannabis products that are purported to be on average, 50 percent cheaper than those of their regulated counterparts, and potentially dangerous.

"The medicine isn’t tested, and from my experience, when we’ve tested illicit cannabis, it’s often found to be high in pesticides," said Goldman. "Lowering the taxes, will put a dent in the illicit market. I think it is an excellent way in the long run to raise state tax revenue from cannabis."

A spokesperson for Newsom's office responded in a statement on Sunday. 

The governor's communications director, Erin Mellon, said that the governor acknowledges the need to curb illegal sales, and supports tax reform, adding in part: "It’s clear that the current tax construct is presenting unintended but serious challenges. Any tax reform effort in this space will require action from two-thirds of the legislature and the governor is open to working with them on a solution."

Among the demands from industry leaders in the letter are an immediate lifting of the state’s cultivation tax on growers, a three-year holiday from the California’s excise tax, and expansion of retail shops through much of the state.