California’s legal marijuana industry faces a year of declining sales as a result of the pandemic-induced recession despite an initial spike in consumer demand after dispensaries were deemed essential businesses, according to details outlined in Gov. Gavin Newsom’s proposed budget.
Newsom projected in January that the state’s cannabis excise tax would bring in $479 million this year and $590 million in the fiscal year starting July 1, but his revised budget now forecasts just $443 million this year and a decline to $435 million next year.
“While similar products like alcohol and tobacco tend to be recession-resistant, the forecast assumes that cannabis businesses will be more negatively impacted by the COVID-19 pandemic,” the budget says. “Cannabis businesses have less access to banking services that could provide liquidity, have a younger consumer base likely to be disproportionately affected by the COVID-19 recession, and still must contend with competition from the black market.”
In an attempt to help the state’s legal pot industry weather a downturn, the Newsom administration has relaxed some restrictions on how cannabis firms operate, deferred license renewal fees and extended the deadline for filing first quarter tax returns.
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