December 17, 2019 - In November 2016, California voters approved Proposition 64, which legalized the nonmedical use of cannabis (typically called recreational or adult use) and created a structure for regulating and taxing it. In this report we provide (1) background information on cannabis and its legalization in California, (2) a discussion of the effects of adjusting the tax rate, (3) an assessment of other potential changes to California’s cannabis tax structure, and (4) recommendations for the Legislature.
December 17, 2019 - In this post, we describe some of the similarities and differences between taxes on cannabis and taxes on other products in California. Our estimates suggest that taxes on certain cannabis products are roughly comparable to taxes on distilled spirits but much higher than taxes on beer and wine. California’s state and local governments generally tax cannabis—including medical cannabis—more heavily than other medicines. In some instances, however, exemptions can make tax rates on medical cannabis comparable to tax rates on other medicines.
May 6, 2015 -
California’s state and local governments levy a tax on retail sales of tangible goods. This report begins with an overview of California’s sales and use tax. It then provides more detail about which transactions are subject to this tax, the variation in tax rates across the state, the distribution of revenue among state and local governments, and revenue growth over the last few decades.
(5/12/15: Correction made to expiry date of manufacturing equipment exemption.)
(5/12/15: Correction made to difference in sales tax for gasoline.)
February 14, 2020 - The Governor’s 2020-21 budget includes various cannabis-related proposals, including both budget trailer legislation and budget change proposals from multiple departments. In this report, we (1) provide some background on cannabis regulation and taxation in California; (2) describe the Governor’s proposals; and (3) provide recommendations on these proposals for legislative consideration.
January 18, 2001 - The purpose of this primer is to address, in a highly graphical format, various questions, including: What are the different types of taxes upon which California relies? What is their relative importance, and how have they evolved over time? How large a "burden" do these taxes impose on Californians and how is this burden distributed? What types of policy issues are associated with the current tax structure?
November 26, 2018 - Taxes on sugary drinks have become increasingly common in recent years. In June 2018, the Legislature passed a law (Chapter 61 of 2018 [AB 1838, Committee on Budget]) prohibiting local governments from levying such taxes (and other taxes on groceries) through 2030. The law stated the Legislature’s intent to regulate the imposition and collection of such taxes to the exclusion of local action. As such, the Legislature may face the following decisions: (1) Should the state levy an excise tax on sugary drinks? and (2) If so, how should the tax be designed? This report provides information and perspectives for the Legislature to consider as it weighs these choices.
February 25, 2020 - Assembly Budget Subcommittee No. 4 on State Administration Assembly Business and Professions Committee
April 9, 2007 - What are the different types of taxes upon which California relies? What is their relative importance, and how have they evolved over time? How large a “burden” do these taxes impose on Californians, both in absolute terms and compared to other states, and how is this burden distributed? What types of policy issues are associated with the current tax structure, especially in light of our changing economy? The purpose of this primer is to address these and other tax-related questions, so as to aid policymakers and other interested parties in their tax-related deliberations and decision making.
April 22, 2015 - California imposes excise taxes on cigarettes and on other tobacco products such as cigars and chewing tobacco. The state also licenses tobacco sellers and distributors. Recently, there has been considerable legislative interest in the cost of these programs, which are administered by the State Board of Equalization (BOE). The Legislature faces two key decisions: (1) how to pay for BOE’s cigarette and tobacco programs, and (2) how much to spend on them. This report recommends that the state use excise tax revenue to pay for excise tax administration but not for the tobacco licensing program. To address the imbalance between the licensing program’s costs and revenue, we further recommend the Legislature (1) temporarily increase fees on tobacco retailers, wholesalers, and distributors, and (2) direct BOE and the California Department of Justice to explore options to reduce the program’s costs by promoting electronic filing of schedules and tax returns.