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Who Gets The Cash From a Pound of California Cannabis

Who earns a profit, and what are the costs and taxes for a pound of California cannabis. aBIZinaBOX Inc., CPA's CPG offers some insights.

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Who Gets The Cash From a Pound of California Cannabis

  1. 1. Who Gets The Cash From A Pound of California Cannabis Illustrations of How The Pie Gets Sliced Up March 5, 2019 (c) aBIZinaBOX Inc., CPA's - CPG 1
  2. 2. Tax Assumptions This table summarizes our assumptions for the CCT, CET, State Sales Tax and local cannabis tax March 5, 2019 (c) aBIZinaBOX Inc., CPA's - CPG 2
  3. 3. Cultivator Production Assumptions The assumptions for Cultivator costs, how CCT is paid, and the price that a Distributor pays for product March 5, 2019 (c) aBIZinaBOX Inc., CPA's - CPG 3
  4. 4. Dispensary Costs and Pricing The Dispensary marks up the price it paid to the Distributor. We use 60% for illustration as it represents the CDTFA assumed mark-up . A Dispensary is NOT bound by that mark-up, but it must charge CET on its actual markup. We push the mark-up down to the 1/8 level so that pricing is relevant to the consumer. March 5, 2019 (c) aBIZinaBOX Inc., CPA's - CPG 4
  5. 5. Dispensary to Consumer We believe that what is relevant to the consumer is that the 1/8 package with the $25.00 price tag is going to cost $34.79 ”out the door” or $9.79 additional [CCT included] – 39% more to cover the taxes. March 5, 2019 (c) aBIZinaBOX Inc., CPA's - CPG 5
  6. 6. How Much Tax Is Paid On That Pound March 5, 2019 (c) aBIZinaBOX Inc., CPA's - CPG 6
  7. 7. Recap of Total Costs Now that we have illustrated the process and you sees what the costs are…we can share some variations (c) aBIZinaBOX Inc., CPA's - CPG March 5, 2019 7
  8. 8. First Scenario The Cultivator is paid $1,200/lb with Distributor assuming CCT, add Distributor Costs of $450, marks up to $2,000, the Dispensary Costs add $450 marks up to $3,200 [60%] or $30 for a 1/8 package March 5, 2019 (c) aBIZinaBOX Inc., CPA's - CPG 8
  9. 9. First Scenario – Medical Card If we happen to have a Medical Card when we by that pound, we save $404 in taxes or $3.16 on a 1/8 package March 5, 2019 (c) aBIZinaBOX Inc., CPA's - CPG 9
  10. 10. Second Scenario The Cultivator receives $1,300 an increase of $100 from the preceding, and the Distributor increases mark-up its by $500 to $2,600. The Dispensary increase the retail price to $4,160 or $32.50 for a 1/8 package March 5, 2019 (c) aBIZinaBOX Inc., CPA's - CPG 10
  11. 11. Third Scenario The Cultivator is paid $1,400/lb, with CCT assumed [Net $1,252/lb., the Distributor marks up the price to the Dispensary to $3,000 which increases the cost of a 1/8 to $37.50 pre- tax March 5, 2019 (c) aBIZinaBOX Inc., CPA's - CPG 11
  12. 12. More Realistic Alternative A more realistic scenario drops the price to the Cultivator to $1,000 per pound, and reduces the Cultivator’s costs to $452/pound. The Distributor sells to the Dispensary at $2,500/pound. The Dispensary turns around and marks up by 60% which prices a 1/8 at $31.25, exclusive of the taxes paid by the consumer March 5, 2019 (c) aBIZinaBOX Inc., CPA's - CPG 12
  13. 13. Who Is Taking Home The Cash? • If we use the last scenario and focus for a moment, the shares of the cash are • Cultivator - 9.09% • Distributor - 24.92% • Dispensary – 24.92% • CDTFA and Local Tax – 40.67% • We suggest that something is VERY wrong with this outcome
  14. 14. Cultivator and Distributor Cash Movement March 5, 2019 (c) aBIZinaBOX Inc., CPA's - CPG 14

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