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California Governor Signs Legislation to Make Big Changes to the State’s Legal Cannabis Industry


The California legislature has spent a good portion of the year focusing on ways to improve the legal cannabis industry in their state. Recently, several pieces of legislation have arrived at Governor Gavin Newsom’s desk, pertaining to issues such as revamping the tax situation, creating better access for medical marijuana patients, etc – and most of them were signed into law this week. 

There is no shortage of complications when it comes to running a state-legal cannabis industry in the bizarre grey area that exists. With states legalizing cannabis at their level while the federal government continues prohibition, it creates a great deal of conflict in the law that make things difficult for those working in the industry. 

One of the biggest hurdles for most cannabis businesses is taxes, and there are a number of reasons for this. The lack of banking access means many marijuana businesses pay their bills – including their taxes – in cash. Another major problem comes at a huge financial cost to business owners as they are unable to claim normal business deductions that any other business would have. Just last year, the court system ruled against a Colorado cannabis business that attempted to take normal business deductions. 

In California, however, this situation is about to change drastically starting in the year 2020, as Governor Newsom signed AB37 into law. The bill will allow businesses to take standard deductions on their state income tax, which will save them thousands of dollars that can go toward paying a much higher federal income tax. This is a huge improvement for cannabis businesses in California, where legal medical marijuana has been around since 1996. 

Along with making these improvements to the state’s tax laws, Governor Newsom also signed SB34. This legislation allows businesses to provide free medical marijuana to low-income patients. It also makes those products exempt from state taxes, making it a more viable option for business owners to provide free access for patients who need it. 

Out of all the bills that were sent to the governor to improve the cannabis industry and access to medical marijuana, there was one that he decided to veto. SB305 would have required certain healthcare facilities to allow terminally ill patients to use medical cannabis on site. 

The issue with this, as Newsom cited, is that facilities would then be at risk of losing Medicare and Medicaid funds for going against federal law. That would result in the loss of healthcare access for millions who rely on government health insurance, and was too big of a risk for Newsom to take.

“This bill would create significant conflicts between federal and state laws that cannot be taken lightly,” the governor wrote in a veto message.

Overall, there were more wins than losses in this round of legislation reviewed by Governor Newsom. With the change in taxes for cannabis businesses starting in 2020, they won’t see the difference until they file in 2021 – but knowing such a big change is coming is surely a relief for many.