How the New Excise Tax in California is Impacting Small Business Owners

The new excise tax in California has been a topic of much discussion in the business world, particularly for small business owners. The tax, which went into effect on January 1, 2020, imposes a 15% tax on all cannabis and cannabis products sold for recreational use in the state, in addition to the existing state sales tax.

What is the Excise Tax?

The excise tax is essentially a tax that is charged on a specific product, in this case, recreational cannabis and cannabis products. The tax is paid by businesses but is ultimately passed on to purchasers. The new excise tax is in addition to the already existing state sales tax, which is currently at 7.25%. Therefore, the total tax on recreational cannabis and cannabis products is now at 22.25%.

Impact on Small Businesses

The impact of this new tax is particularly felt by small businesses. Many of these businesses were already struggling prior to the introduction of the excise tax, and this additional tax has only added to their financial burden.

Small business owners have had to adjust their pricing in order to cover the additional cost, which has led to a decrease in sales as consumers turn to other alternatives. Additionally, because of the new tax, the process of getting licensed and compliant has become increasingly more expensive for small business owners, further reducing their competitiveness in the market.

Some Possible Solutions

So, what can small business owners do in the face of this new burden? One possible solution is to focus on increasing efficiency in operations.

Small business owners must have a clear understanding of their financial situation and identify areas where they can cut costs and streamline operations. Another option is to diversify their product offerings, moving into other markets such as wellness and hemp-based products which are not subject to the excise tax.

Finally, small business owners can also seek the help of experts to help them navigate the complexities of the new tax regime. There are many organizations and individuals who can provide advice and support in these areas, giving business owners the peace of mind that they need to focus on their core business.

Conclusion

The new excise tax in California has undoubtedly had a significant impact on small business owners. However, there are steps that can be taken to mitigate the negative effects of this new tax. By focusing on efficiency, diversification, and seeking outside support, small business owners can ensure that they remain competitive in the market.