Stanislaus County voters could see a cannabis tax on the November ballot that would apply to licensed businesses in the unincorporated areas.
The cannabis tax would replace the fees in development agreements with beleaguered cannabis operations to simplify assessments and reduce administrative burden. The county’s proposed rates are similar to the commercial cannabis business taxes in Modesto.
The Board of Supervisors, on a 4-1 vote, introduced the ordinance Tuesday and will consider an amendment at a public hearing Feb. 27, after which the board could formally act to put the measure on the ballot.
If approved by a simple majority, the measure would establish a cannabis business tax ranging between 1% and 8% of gross sales. The county would start with a 8% tax rate for retail shops and could adjust the rate within that range from year to year.
The initial rates for cultivation, nurseries, distribution, manufacturing and testing would be 2.5%. The ordinance would limit tax-rate increases to a half percent in any year.
The county expects to receive $1.7 million in annual tax revenue for the general fund.
County officials said the tax also would apply to illegal growers, providing an edge to law enforcement in shutting down black-market cultivation. Authorities could cite the nonpayment of taxes in recovering the costs of raiding illegal grows.
With a tax based on gross sales, businesses will pay less when sales are down and more when sales are up, rather than pay the flat fees specified in development agreements, county staff said.
Zach Drivon, an attorney for several legal cannabis businesses, said a 2.5% tax rate would nearly double the tax obligation for cultivation and nursery operations, which currently pay fees based on square-footage of the canopy. County staff will analyze a possible amendment for a new square-footage rate for those business types, which will be considered Feb. 27.
Supervisor against measure, saying county time could be better spent
Supervisor Terry Withrow opposes putting the tax measure on the ballot. He was opposed to pot legalization under Proposition 64 but later favored a county limit of 61 permits for commercial cannabis businesses. He now regrets that, saying the county has spent a huge amount of time on permitting cannabis businesses and overseeing development agreements, which haven’t produced the anticipated revenue for the county.
“Here we are trying to figure out how to accommodate our marijuana dispensaries and grows [when] we could be spending time doing so much more for this community,” Withrow said.
Withrow added the high potency of marijuana today contributes to mental health issues for users when about 15% of the county’s budget is devoted to mental health services. Withrow said he’s talked with a mental health professional about the effects of high-potency marijuana.
As of Feb. 1, there were 16 active development agreements with cannabis businesses in the county’s unincorporated areas, after eight development agreements were mutually canceled.
Business owners, saying the black-market marijuana trade has an unfair advantage, have complained they’re not able to pay the fees in their development agreements. California’s legalization initiative in 2016 reduced criminal penalties for illegal growing, making it difficult for law enforcement to stop the illegal trade.
The annual budget for the county cannabis program lists $4.4 million in appropriations for the Sheriff’s Department, fire and agricultural inspections, the District Attorney’s Office, chief executive office, environmental resources, planning and parks, but the program budget is adjusted based on anticipated revenue.
“Definitive revenue projections are approximate due to the unknown future total gross revenue from existing cannabis operators,” a county staff report said.
Recent Comments