The cost of safely growing cannabis in California

Published May 19, 2020 11:00 a.m. ET
iStock / Shannon Price

Excessive mandatory testing is one of the many things driving the price of cannabis in California up and away. The cannabis consumer can pay less for their herb when engaging in sales with the legacy market. Taxes are not part of the transaction when dealing with the legacy market, which is what makes their products more affordable. Uncertainty may be there regarding testing, but many consumers are satisfied and believe that the cheaper legacy market is the way to go. Why is safety so expensive where cannabis and testing are involved?

Did you pass the first time?

Growing cannabis requires the passing of many safety tests. These tests can be the reason for ten percent of the average wholesale price of legal weed. A large amount of the expense comes from getting negative results. Testing in California is costly, and the consumer must help to bear the extra expense. Some consumers say no, as they would prefer to purchase from the legacy market.

Bugs and contaminants

Every batch of legal weed in California must, by law, be tested. Each batch is tested for more than 100 contaminants and over 66 pesticides, among other things. The accepted levels for cannabis test results are lower than what is acceptable for any other agricultural product.  These test requirements must be met before cannabis can be sold to cannabis consumers by a licensed retailer. Any of the submitted batches that do not pass the testing must be destroyed. Testing for those growing cannabis in California is one of the most highly regulated in the nation.

Legacy vs big bucks

Some studies have shown that the tight conditions required for passing testing requirements of cannabis in California, cost money and lots of it.  It is an expense that is reflective of the consumer's wallet. The legacy market is much more appealing, as paying less money for the same product seems the better choice. However, one needs to remind themselves, why is it cheaper?

The annual licensing and application fees range from $135 to $8,655, and it costs between $3420 and $77,905 for licensing fees. For being the countries' most significant market, these fees are acceptable. However, the taxing is, for some, unbearable. The amount of taxes payable along the supply chain is perhaps the primary reason for such a flourishing legacy market existing in California.

The cost of growing marijuana as a business venture increases each time new regulations, or new legislation is bought forth. The price of growing marijuana rises with each new rule. When January 1st, in 2020 came, Californians were hit with another green tax. (CDTFA) The California Department of Tax and Fee Administration:

  • Introduced a mark-up rate that will jump from 60% to a whopping 80%. The mark -up rate would also be the basis for a 15% Golden State excise tax. This increase is mandatory and mandated by (Prop 64) legislation.
  • The cultivation tax in California is being adjusted for inflation and adds to the expense of growing marijuana in California.

What’s in a name?

Weed a small town in California, in Siskiyou County named not for growing marijuana, but for a pioneer named Abner Weed, has something to celebrate. 2019 saw the city embrace the name of their town, Weed.  The residents of the region celebrated their first 420 educational weed festival held in the town, just last year.  Sponsorship for the event was given from the town's chamber of commerce.  Organizers saw this first-time event as mainstream as the attitudes towards growing marijuana are not so adverse, and so it is beneficial to promote weed.

In conclusion, the cost of growing marijuana in California and it’s processing leading to an end product is expensive due to the information below:

  • A cultivation tax that is dependant on the stage of the plant presented for taxing
  • Quality control testing
  • State taxation
  • Local taxation
  • The 15% excise tax

The legacy market in California is aware of this information, and it is reflective in the lower prices, thus leading to a budding and lucrative market. The legacy market is thankful to Californian politics for the increasing of taxes, regulations, and legislation making for a more profitable business for them.

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