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Marijuana dispensaries worried about California’s 2020 tax increase on wholesale

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SACRAMENTO, Calif. (KTXL) -- Starting Wednesday, the price of marijuana at California dispensaries will cost a little bit more.

The state’s tax rates on wholesale cannabis will go up from 60% to 80% as determined by the Department of Tax and Fee Administration.

Some dispensaries worry the increase could push more patients to the black market – a trend a recent state report finds is already a major problem.

Phillip Blurton is the owner of All About Wellness, a dispensary located in midtown Sacramento.

“People behind the counter will let nine people in at the same time,” Blurton told FOX40. “One leaves, we’ll let another one in."

While Blurton said his business is expanding to a larger building next door, his bottom line is not growing all that much.

“$22,600 a year for our annual license for the city. $96,000 for the state,” Blurton said. “And then an additional 15% tax to the state. So, you add that all up, the profit margins are pretty, pretty slim.”

The CDTFA says its analysts determined a 60% markup on wholesale collected by distributors must be raised to 80%. It will ensure the tax paid on all products is equal to 15% as required by law.

Cultivation fees are also going up. Basically, Blurton said that means a product that’s $60 today will be $70 tomorrow.

“We’re going to absorb as much of it as we can here at All About Wellness, but we can’t absorb it all,” Blurton said.

Some customers like Dan Morino said they don’t mind the increase.

“Someone like me, I don’t mind paying my taxes and my fair share. But you know, that’s the name of the game,” Morino said.

But All About Wellness employee Zack Mills said the increase hurts medical users and many of them are cancer patients on tight budgets.

“You know, somebody has $50 set aside in their budget for it and now if it’s going to be $60," Mills said. “That definitely hurts them in the long run.”

A recent state report found that as much as 80% of marijuana sales come from the black market. Blurton, Mills and others fear that number could grow with each tax increase as street prices will be cheaper.

“I mean, when you can get twice as much marijuana from your neighbor or whoever for a third of the price, why would you come in here?” Mills said.

Blurton told FOX40 not all his prices will be going up. One-eighth of an ounce will stay the same price, but that may not be the case at other dispensaries.

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