Marijuana + Business

A blog from one of our very own 6˚ interns: 
Tabi Hoshmand

Marijuana + Business

California’s proposition 64, passed November 8th, states that residents and visitors were legally
allowed to consume marijuana as of November 9th, 12:01 AM. However, sales of marijuana did not
begin until the first of the year. With a change like this, comes rules and regulations that the state
must craft for this emerging market. This includes everything from where the plants will be grown to
how they will be sold.

At this time, the sale of marijuana follows a similar style to alcohol regulation. Adults must be age 21
and up, legal cultivation is required and state/local taxing is established, along with many other

The two biggest economic forces that will result from the legalization of marijuana will be a higher
return rate and the inclusion of taxes. A legalization not only reduces risks to produce and sell
marijuana, it also increases the chance of new entrepreneurs looking to get involved in the marketing.
Why is this such a big deal for California and for you? Because California is the sixest largest economy
in the world. If we put that in perspective, that means that this state’s economy is larger than some
countries. With a projected value of $7 billion and collected taxes at $1 billion a year, we are looking
at an industry that could be fairly beneficially to our market. Specifically, the state benefits financially
with two specific taxes, the cultivation tax and the retail tax.

Let’s talk taxes. We’re looking at $1 to $1.5 billion of tax revenue going into this market. According to
a report in New Frontier Data and ArcView Market Research, this number is only projected to
increase: $3 billion in 2019 and about $4 billion by 2020. According to the nonpartisan Legislative
Analyst’s office, that kind of impact in dollars is likely to be in the top millions to over $1 billion a year.
Another thing to consider is the businesses and people that will require licensing for the industry. The
law requires about 20 different types of licenses and permits that cover everything from delivery
services to testing labs, from farmers to distributors. It’s also important to mention the oversight of
issues like water quality that must be monitored.

A lot of money has been put into establishing programs for collecting taxes, issuing licenses and hiring
employees for the industry. There’s also a requirement of a computerized-system to track cannabis.
There are lots of changes and expenses that have some concerned about the rate of turn around to
accommodate for the new industry.

Keep this things in mind when you’re adjusting your company to the current economic state. Only
time and money can tell how this new industry will plan out for not only California residents, but for
the rest of the country.

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