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California Governor Proposes Changes To Cannabis Regulation, Taxes

California Governor Gavin Newsom announced plans to simplify the state's cannabis regulatory and tax systems.

The proposed changes were unveiled by Newsom in his 2020-2021 state budget proposal that was submitted to the Legislature on Friday.

The Governor said that in an effort to improve access to licensing and simplify regulatory oversight of commercial cannabis activity, his administration plans to consolidate the three licensing entities in the state into a single Department of Cannabis Control by July 2021.

The three state entities are the Bureau of Cannabis Control, the Department of Food and Agriculture, and the Department of Public Health. Currently, all the three entities have licensing responsibilities in the state.

Newsom noted that the establishment of a stand-alone department with dedicated enforcement will centralize and align critical regulatory functions to build a successful legal cannabis market. It will also help create a single point of contact for cannabis licensees and local governments.

The Newsom administration will submit more details on this proposal in spring 2020.

As approved in Proposition 64, excise taxes are levied on the cultivation and retail side of both adult-use and medicinal cannabis with tax revenues deposited into the Cannabis Tax Fund, to be allocated to various state entities.

California's cannabis excise tax is forecast to generate $479 million in 2019-20 and $550 million in 2020-21.

Newsom has also proposed to simplify tax administration for cannabis in California by changing the point of collection of cannabis taxes.

The changes will move the responsibility for the cultivation excise tax from the final distributor to the first distributor, and also move the retail excise tax from the distributor to the retailer.

In consultation with the marijuana industry and stakeholders, Newsom's administration will also consider other changes to the existing cannabis tax structure, including the number of taxes and tax rates. The governor expects the changes to simplify the system and support a safer legal cannabis market in California.

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