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Cannabis Business Tax “Measure A”

Cannabis Business Tax

What is the Sonoma County Cannabis Business Tax – Measure A all about? In December 2016, the Sonoma County Board of Supervisors unanimously adopted an ordinance for a cannabis business tax to be imposed on cannabis operations within the unincorporated areas of the county. The Cannabis Business Tax ordinance is intended to provide the funding source required by Sonoma County’s Cannabis Land Use Ordinance, which was also adopted in December 2016, so that permit applications can be accepted by the County for commercial cannabis businesses in early summer, likely June 2017.

Sonoma County Business Tax Special Election

Sonoma County is holding a special election for Measure A – The Cannabis Business Tax, on Tuesday, March 7, 2017.  Registered voters of Sonoma County have already received their ballots and voter pamphlets by mail. The tax to be imposed will be a general tax and will be placed in the County’s general fund.

Initially, taxes would be imposed on cultivators and manufacturers only, although the county would be able to impose a tax on all cannabis business operators as described below.

Commercial Cultivation Taxes: Cultivators will be taxed on the cannabis cultivation area allowed under their permit on a per square foot basis.  The initial rates will vary depending on the size and type of cannabis cultivation and range from $0.50 (cottage outdoor) to $18.75 (medium indoor). The maximum allowable tax rate ranges from $10 (medium outdoor) to $38 (medium indoor)

Other Commercial Cannabis Businesses: Every “person” (as defined by the ordinance) engaged in commercial cannabis activity shall pay an annual commercial cannabis business tax at a rate of up to ten percent (10%) of gross receipts per fiscal year, including manufacturer, transporter, distributor, cannabis nursery, cannabis dispensary, and cannabis testing laboratory. Per the ordinance, only manufacturers will be required to pay five percent (5%) of their gross receipts, initially.  All “commercial cannabis businesses” as defined by the ordinance, will be required to provide the county with a quarterly report of their gross receipt.

The County’s cannabis tax rates cannot be considered in a vacuum. Consideration should be paid to the aggregate impact of state and federal taxes as well as other costs of compliance (e.g. application fees, capital investments, professional assistance, etc.). However, keeping in mind the timeline for permits and licenses is critical.

The Cannabis Land Use Ordinance specifies that a tax measure must be passed or an alternate funding source must be obtained before the County can accept permit applications for commercial cannabis businesses to operate in Sonoma County. With no other funding source available, the Supervisors have advised that the tax measure must pass for cannabis permit applications to be accepted by the County.

Many operators have been waiting for Sonoma County to pass their Cannabis Land Use Ordinance so that they can apply for a local permit to operate.  Under the state regulations, operators must have local permission before they can apply for a state license, which will become available in January 2018. The medical collective model sunsets by 2019, so operators must have both a local permit and a state license to operate a medical cannabis business at that time. This timeline is critical because the County needs time to process local permits. If the County is delayed in processing permits, operators will not be able to get in line early for state licenses.

Therefore, it is essential for operators to pass a tax measure or find an alternate funding source for applications to be accepted, if they want to operate in the unincorporated areas of Sonoma County.

If Measure A is passed by a majority of the voters, the ordinance will be effective and operative on April 6, 2017.  This means that the taxes imposed under the ordinance would begin to accrue from that point forward.  Under the ordinance, quarterly reports will be due from all commercial cannabis businesses, and all businesses must register with the county before they can operate.  To assist with questions, the County released FAQs “What do you know about Measure A?”

City of Santa Rosa Cannabis Business Tax Ordinance

The City of Santa Rosa (“the City”) is also working on a cannabis business tax ordinance, and they will be holding a special election in June for the voters to approve their proposed tax.  The City is still developing the proposed cannabis tax ordinance.

The City of Santa Rosa Cannabis Subcommittee will meet on February 16, 2017 to continue working on the proposed ordinance.  This meeting is open to the public and public comments are accepted and encouraged.

The County and City of Santa Rosa will hold a public workshop on February 21, 2017 from 6:00 pm to 8:00 pm at the Glaser Center in Santa Rosa.

You can let Sonoma County know how you feel about Measure A, and take their survey.

Resources

For information from the County re: their FAQs on Measure A, the County/City Community Workshop, and/or the Cannabis Land Use Ordinance and Cannabis Business Tax Ordinance:

Adopted Medical Cannabis Program Ordinances & Policies

Sonoma County Cannabis Land Use Ordinance

Sonoma County Business Tax Ordinance

By Jolene Strange, Paralegal and Julie Mercer-Ingram, Attorney with Canna Legal, a division of Beck Law, P.C. – February 14, 2017

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