Why Legal Weed Has Gone So Poorly
After 2 years of legalizing adult-use marijuana in California, many are left standing on the sidelines wondering how it all went so wrong for something so good. In today's current market, legal cannabis has seen exuberant prices in almost all products across the industry. From wax, to flowers, to vaporizers, everything is being heavily taxed causing many customers to go back to illicit markets for their needs. Many companies are losing business and facing looming bankruptcies with unpaid bills for products or services received. It has been a nasty mixed cocktail of high taxes, high barrier of entry, sky high compliance cost, and unforeseen circumstances.
Today, customers are seeing as much as 3 different taxes when buying their weed. A sales tax, excise tax, and state tax, all of which can add up to almost 35% more during checkout. Although customers can choose to register as a medical patient to help alleviate the excise tax, many are still seeing premium fees for their medicine. Not only is this taking a toll on the customer, businesses are losing their edge to the black market due to heavy premiums.
High Barrier of Entry
Like alcohol, marijuana has been portrayed as a vice. Due its status and intoxicating effects, states are regulating the industry with heavy scrutiny. With tough regulations in place, many small businesses are excluded from having a chance in the sector. Obtaining licenses has become a pay to play process, some may even say it seems like buying lottery tickets. Companies must not only go through the hurdles of obtaining the licenses required, but also securing the facility that is zoned and constructed properly. All this can be a strain to play out simultaneously while spending high fees on legal advice and paperwork.