US: Medical cannabis cooperative association

As we have said on multiple occasions, a CCA is the most financially efficient structure for engaging in business in California’s cannabis industry. The use of a CCA to move extracted oil as medical cannabis produces even greater price reductions for consumers than are produced in the movement of flower as medical cannabis. More costs are incurred between the cultivator and the consumer in the movement of extracted oil than in the movement of flower. The financial benefits from the use of a fully integrated CCA increase as a consequence.

The basis for the spreadsheet immediately below is a sale of five kilograms of trim by a cultivator at a price $304.60 per kilogram including Cannabis Cultivation Tax (“CCT”). The manufacturer assumes the CCT. The net to the cultivator is $1,051 which is approximately $95 per pound. We further assumed the cultivator has a production cost of $394 for the five kilograms of trim which produces a $657 before tax profit for the five kilograms.

For the manufacturer, we assumed additional costs of $1,094 and a profit of $657 on the extraction of the five kilograms of trim. We further assumed the manufacturer passed on the CCT to the distributor. We assumed the distributor had additional costs of $657 in packaging and handling of the oil, and had a profit of $657. We assumed a yield of a total 125 grams of refined oil (250 packages of 0.5 gram). For the dispensary we assumed additional costs of $789 and a profit of $1,971 on the 250 cartridges based on a 60% mark-up of the wholesale cost of the cartridges from the distributor.

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