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California's small cannabis growers face extinction as taxes, bills and snow pile up

“I don’t want to be dramatic, but the survival of the legacy small-craft businesses in California is at stake," said the executive director of the Mendocino Cannabis Alliance.

April 14, 2023, 8:00 AM EDT By Alicia Victoria Lozano

HUMBOLDT COUNTY, Calif. — Booming thunderclaps cracked like gunfire through the cold night air as heavy branches snapped off ancient redwood trees and slammed to the earth 200 feet below.

“It sounded like a war zone,” said cannabis farmer Shanon Taliaferro of the January storm, one in an unrelenting series that walloped California this winter, causing at least half a billion dollars in damage. “It was all hands on deck.”

Seemingly no corner of the state's $51 billion agricultural industry was spared the winter's wrath, including the nearly 3,000 small cannabis farmers who were hit hard by the storms. It will be months before a full financial picture emerges, but outdoor cultivators are already feeling the financial squeeze as they confront an existential question: How much longer can the people who built California’s cannabis industry afford to stay in it?

Shanon Taliaferro stands among the damaged farm equipment on his property, left, after winter storms destroyed a water tank, upper right, and bent the frames of a greenhouse on his cannabis farm in Northern California.Alexandra Hootnick for NBC News

The severe weather was the latest blow to the industry, which has grappled with high taxes, falling sales and increasing competition from vast, indoor farms.

“We’re seeing the individual collapse of the legacy farmers — the mom and pops who have been doing this for 15 or 20 years and who have a real stake in this game,” said Victor Pinho, who operates a cannabis farm tour company in Northern California. “It’s just hit after hit after hit on these poor people.”

Despite living and working in the unofficial capital of cannabis, cultivators in Northern California's Humboldt, Trinity and Mendocino counties, known as the Emerald Triangle, have struggled since recreational marijuana was legalized in 2016.

Severe drought and wildfires have destroyed crops, and taxes and compliance fees have depleted profits while a still-thriving black market continues to drive prices down. Now, historic snow and cold have dealt another setback.

“No one was prepared for storms of this magnitude,” said Michael Katz, executive director of the Mendocino Cannabis Alliance. “I don’t want to be dramatic, but the survival of the legacy small-craft businesses in California is at stake.”

For Taliaferro, who owns seven farms in Humboldt County, the fury of wind and rain ripped a yurt on his property from its foundation, destroyed three water tanks and leveled four greenhouses. One tank was found weeks later a half mile down the mountain.

Taliaferro estimates the winter storms cost him at least $50,000 in damage, not including delays in planting because of persistently cold weather that has lingered into spring. Because cannabis remains illegal under federal law, he cannot apply for federal assistance to recoup losses or help rebuild his infrastructure.

"Friends who haven’t diversified their incomes are close to losing their homes or moving back in with parents," he said. "People who were here for a quick buck are going elsewhere."

Despite California's position as the nation's largest recreational cannabis market, its annual sales slumped last year for the first time since sales began in 2018. Annual legal sales reached $5.3 billion in 2022, down 8% from $5.77 billion the year before, according to the California Department of Tax and Fee Administration.

The downturn follows a 2021 bear run that drove wholesale prices as low as $300 a pound compared to a high of $3,000 in some years, hurting small, seasonal operators unable to compete with year-round indoor cultivators.

Only after industry insiders complained of a collapsing market and officials realized cannabis wasn't the green rush once envisioned did California begin to ease regulations and reduce state and local taxes.

Shanon Taliaferro surveys the damage to greenhouses on his Northern California farm after severe winter storms.Alexandra Hootnick for NBC News

But as the market began to stabilize in 2022, a new obstacle surfaced by the end of the year: historic storms that hit outdoor farmers in the Emerald Triangle hard. The three counties found themselves on the defensive against another blow to California’s troubled cannabis market.

“There are lots of nails in that coffin,” said Brandy Moulton, a former Mendocino cannabis farmer who was forced to close her grow operation in 2022 after paying about $60,000 a quarter in taxes for three years.

Across the Emerald Triangle, farmers said they have stopped paying their taxes because they can't afford it, and some growers are considering going underground into the black market, where they can set their own prices and avoid the levies.

Last year, California overhauled its cannabis tax structure and eliminated at least one cultivation tax on growers. It also moved the 15% excise tax from distributors to retailers. But that's of little help to Taliaferro, who said he uses nearly half of his income to pay for permits and taxes.

Nicole Elliott, director of the California Department of Cannabis Control, said, “There is still a lot of work to do. We acknowledge that.”

Dusty Hughston, of Cougar Ranch Family Farms, inspects marijuana plants with business partner Shanon Taliaferro.Alexandra Hootnick for NBC News

Many communities in the Emerald Triangle were founded by cannabis farmers in the 1960s, when hippies and homesteaders began growing the crop clandestinely under the thick canopy of towering, old-growth redwood, Douglas fir and oak trees.

Once a mecca for logging, Humboldt and surrounding counties blossomed into California’s worst kept secret, producing what became the gold standard for cannabis not just in the state but across the country.

A legacy farmer born into the cannabis trade, Taliaferro, 50, grew up in the Humboldt mountains. His mother moved to the area in 1974 and started a small pot farm tucked deep inside the forest.


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