California Law Regarding Legal Marijuana and Taxes


The pot shops will soon open and even though recreational marijuana is legal now, there are still plenty of reasons a black market in marijuana sales will not be going away with the opening of your local cannabis shop. To begin with, the laws regulating the legal cannabis shops are onerous. In fact, it might be a challenge to even understand all the regulations in the 276-page Bureau of Cannabis Control regulations book. And that’s not all: cannabis shops also have to abide by regulations promulgated by the California Department of Food and Agriculture and the Department of Public Health.

The cannabis products that do end up for sale must be tested and tracked under strict rules including limits on the amount of THC allowed in edibles. Furthermore, the fees and licensing requirements are confusing and often costly.

Add to that the taxes that will be imposed on recreational marijuana sales. There will be sales tax, excise tax, and local sales taxes that can end up costing the consumer up to 33% in tax on the product. Then there is the tax on the operators of up to 20% of gross receipts. And don’t forget the marijuana farmers; they will be taxed too at $9.25 per ounce for marijuana flowers and $2.75 per ounce for leaves. While the state may be expecting to rake in on this new industry, there are many reasons to think that the black market in marijuana won’t be going away—especially considering the high price that legal marijuana will command in order to pay for all the taxes.

Take just for example the marijuana farmers. The farmers that are currently growing illegally will have to pay about $100,000 to the state to become a legal grower. Many of these farmers can’t or won’t pay such an exorbitant entry fee and are likely to keep doing like they always have and take the risk.

Indeed, the high price of legal marijuana in the state after all these taxes and fees are figured in just might help the black market. Those trading in illegal marijuana may be able to increase their prices but stay competitive by charging less than what it will cost to buy in a legal pot shop. As the dust settles, it will become clear whether legalized pot makes any dent in the illegal trade.

And then there is the federal government. Marijuana remains an illegal substance under federal law. Not only is it illegal but the federal government classifies marijuana as a Schedule 1 drug, which is the most severe of the drug schedules and includes drugs like heroin. The federal government does not recognize any medical use for marijuana either. While the federal government has not interfered with the many states, including California, that have now legalized marijuana, the current administration has voiced a renewed effort on drug enforcement and there could conceivably be some conflict between the states with legal marijuana and the federal government.

Cultivators, farmers, and cannabis shops all must abide by the strict regulations and tax structures or face administrative or even criminal charges. Ironically, legal marijuana may open up an entirely new practice area for criminal defense attorneys.

Orange County criminal defense attorney William Weinberg has been serving Orange County for almost 25 years. He offers a free consultation about your criminal matter. You may reach him at his Irvine office at (949) 474-8008 or by emailing him at