When California voters legalized recreational marijuana by ballot measure earlier this month, the bill's language depicted the new recreational marijuana program beginning on Jan. 1, 2018 with a 15% excise tax on cannabis products. The medical marijuana system was planned to have a tax break once the recreational program began, however due to a simple error in text, the medical marijuana tax break goes into effect immediately, meaning a long tax revenue dry 2017 is ahead. Writers of the law have made it clear it was not their intention to halt medical marijuana tax revenue immediately, but the state's Board of Equalization ruled to keep the language. Other than a slow year for medical marijuana tax revenue, officials fear that tax-free medical marijuana will attract more patients who might not transition into a more expensive recreational marijuana program when it arrives in 2018.
As a result, tax-free medical marijuana sales will occur in California from now through the end of 2017. With recreational sales not set to begin until 2018, tax-free medical sales leave California facing a disappointing near-term marijuana tax revenue picture. The creators of the initiative have stated publicly that providing a 14-month tax holiday for marijuana was not their intention, but the state’s Board of Equalization ruled otherwise.