Coastal Sun Included in Lookout Santa Cruz Article
- Coastal Sun
- May 1
- 3 min read
Thank you to Lookout Santa Cruz for including us in their recent article: How Santa Cruz County cannabis businesses will benefit from recent reclassification of medical marijuana.
”Rescheduling could give Santa Cruz cannabis businesses meaningful breathing room by lowering taxes, improving access to capital, and potentially expanding trade — but it would not solve every problem facing the industry."
You can read more here:
Below is a summary of the article:
• Santa Cruz County cannabis businesses could see a major financial lift from the federal government’s move to ease marijuana’s legal status.
• The Department of Justice recently said it would reclassify state-licensed medical marijuana as Schedule III, putting it in the same broad federal category as drugs like Tylenol with codeine, steroids and ketamine. Full rescheduling for all marijuana could potentially happen as early as this year.
• The biggest immediate benefit would likely be tax relief. Under Schedule I, cannabis businesses are blocked by IRS rule 280E from deducting normal business expenses like rent, payroll and operating costs. Moving to Schedule III could allow those deductions, lowering effective tax burdens.
• The article notes that California cannabis businesses can face effective federal tax rates above 70%, compared with the standard 21% corporate tax rate, largely because of 280E. Bryce Berryessa, owner of The Hook and Treehouse dispensaries in Santa Cruz, says the change could be a “huge step forward” because any reduction in operating expenses would go straight back into the business.
• Berryessa estimates the tax savings could range from 10% to 40%, and says he would use the savings to reinvest in operations and try to raise employee salaries. His company has about 60 employees.
• The article frames the tax issue as especially important because Santa Cruz County cannabis businesses have been under pressure from high taxes, regulation and difficult market conditions. Santa Cruz Naturals recently closed its Aptos dispensary after previously closing its Pajaro location, citing taxation and regulatory burdens.
• Santa Cruz County had 114 active cannabis business licenses at the end of March, ranking 18th in California by active license count. About 46% of active licenses are for cultivators, followed by roughly 20% retailers and 19% distributors.
• For growers, the potential upside goes beyond taxes. Coastal Sun CFO Darren Story says Schedule III could open the door to out-of-state and possibly international markets for Santa Cruz-grown cannabis.
• Story says the ability to export would reduce risk for local cultivators by making them less dependent on California’s market alone.
• The change could also make banking and financing easier. Cannabis farms often need lines of credit before the growing season, but traditional financing has largely been unavailable because of federal restrictions.
• Story expects more commercial lenders to enter the space if cannabis is moved to Schedule III, which could create more normal banking pathways for farms and operators.
• Even with the optimism, the article makes clear that Schedule III is not the same as full legalization or decriminalization.
• Advocates still want broader reform, especially around criminal justice. Berryessa says no one should be incarcerated for cannabis possession and argues that full decriminalization remains necessary.
• The overall takeaway is that rescheduling could give Santa Cruz cannabis businesses meaningful breathing room by lowering taxes, improving access to capital, and potentially expanding trade — but it would not solve every problem facing the industry.
