Things are moving fast in our community and our industry. As we adjust to the disruption caused by the current crisis, we wanted to provide an update on COVID-19, how we see it impacting the cannabis industry, and how HCGA is responding.
This isn’t a short update, so before we dig into too much detail, we want to highlight what we are asking from you. Please complete our survey on how the COVID-19 crisis is impacting your business. We’ll get more into why this is important later, but if you take one thing from this, please help us document what’s going on by completing the survey.
The past month has been an incredibly stressful time. As we worry about our own health and the health of our community, we also face uncertainty about how the crisis will affect the businesses that we have invested years of money, time, and effort into.
Over the past few weeks, we’ve seen some good news and bad news as an industry.
Here’s the good news. The state of California, as well as local governments in every major cannabis market, have deemed cannabis essential. Cannabis businesses are staying open, and by most accounts, consumers are still buying. We’re fortunate to make something that people still want and need while sheltering in place, and we’re fortunate to have an existing delivery-only infrastructure that can get it there. This is not a small thing. As other small businesses like restaurants, bars, and theaters wonder if and when they’ll ever be able to re-open, the cannabis supply chain is able to continue to function with the support of state and local governments.
Here’s the bad news. We all know that the cannabis industry has been facing major challenges since well before this crisis began. The pandemic, and its economic and human costs, creates intense uncertainty on top of the other major, structural problems that we face two years into regulation. Legal cannabis businesses are still being asked to compete with an illicit market that has the ability to sell substantially cheaper products without the costs of licensing, regulation, and taxation. Limited access to retail severely hampers the legal market, with prohibition still a reality in the majority of California’s cities and counties. And cannabis businesses face a level of regulatory scrutiny and complexity that few other legal businesses - much less small businesses - are asked to contend with.
The pandemic didn’t create these problems, but the crisis is underlining what we already knew: much of our community is on a knife’s edge between success and failure, and as we navigate this crisis, the cannabis industry is unlikely to have have equitable access to the same federal resources that other small businesses enjoy. Even the most basic resources that other businesses have access to in times of distress - like the ability to apply for a bank loan - are out of the question for most cannabis operators.
Addressing the structural problems in California’s cannabis market has been, and will continue to be, the top priority of HCGA’s government relations program. At the beginning of the year, HCGA’s policy committee approved a strategic plan that included advocating to eliminate the state cultivation tax, reduce regulatory burden, open up interstate commerce, expand access to co-operatives, and ensure integrity of appellations. Some of that work has been put on hold as state policymakers have paused normal legislative businesses and prioritized a response to the economic and human costs of the pandemic. Other priorities - like appellations regulations - are continuing on despite the current crisis.
We’re eager to get back to work on all of our big-picture policy priorities: but in the meantime, here’s what we’re doing to respond to the immediacy of the COVID-19 crisis.
Working at the county level for the immediate release of funds to support cannabis businesses.
Over the past several weeks, it’s become clear that cannabis businesses are unlikely to have access to small business aid administered through the federal government. Federal small business loans explicitly exclude cannabis businesses, and other forms of aid are administered through the banking system, further excluding the cannabis industry.
On the state level, some relief has been made available. Cannabis taxes are among several statewide taxes that CDTFA has granted a three-month deferral, and all retailers with tax liabilities under $1,000,000 - including cannabis retailers - have been authorized to defer up to $50,000 in sales tax for up to a year.
As the situation develops, HCGA is looking to the county to secure additional resources.
Documenting impacts to cannabis market and supply chain.
Because cannabis businesses have been allowed to stay open through the shelter-in-place order, the impacts to our industry have been more subtle than the impacts to other small businesses. We also know that cannabis businesses are being affected differently based on a range of factors including license type, size, location, and business model. This makes it especially crucial that we’re able to document how a range of businesses are being affected by the crisis. This is why we’re asking for your help to complete our survey on how COVID-19 is impacting your business. Comprehensive information on how the supply chain is affected will put us in a much stronger position as we communicate with policymakers on how the crisis is affecting the industry.
Maintaining relationships with policymakers to work for structural changes to the cannabis market as normal government business resumes.
While cannabis policy is currently not the top priority for policymakers in Sacramento, at some point, normal government business will resume and the state legislature will again consider detailed policy related to cannabis. When this happens, HCGA will continue to work for elimination of the cultivation tax, streamlined trade samples, interstate commerce, and regulatory relief. During the government slowdown, we’re still continuing to review appellation regulations - with public comment now due to the state on May 6 - as well as working with national trade associations to ensure that Humboldt has a seat at the table in the developing national conversation.
The Humboldt cannabis community is resilient, and this is not the first time we’ve faced challenges. Together, we’ll make it through this crisis, and continue to build an industry based around small farms and independent businesses that produces the highest quality cannabis in the world.