2 California municipalities approve cannabis business tax cuts

Two California jurisdictions have approved cutting cannabis business taxes as the industry lobbies for more relief from local municipalities.

Board supervisors in Sonoma County approved significant tax cuts on marijuana cultivation, slashing levies by more than half in some cases.

In a 3-2 vote, the board enacted the following tax reductions, according to The Press Democrat:

• Outdoor cultivation, from 69 cents per square foot to 36 cents per square.
• Mixed-light cultivation, from $2.51 per square foot to $1.15 per square foot.
• Indoor cultivation, from $7.58 per square foot to $3 per square foot.

The Santa Rosa newspaper noted this is the fourth rate change in Sonoma County since 2017, a year after California voters greenlit recreational marijuana and a year before adult-use sales began.

The tax cuts, which must be approved in a final vote in May, would take effect July 1.

Desert Hot Springs cuts marijuana sales tax

Meanwhile, the Desert Hot Springs City Council unanimously backed an ordinance proposal that would cut the cannabis sales tax from 10% to 5% in an effort to support struggling retailers in the Coachella Valley municipality, according to Palm Springs TV station KESQ.

Final adoption is expected May 6, KESQ reported.

The tax relief was applauded by operators and industry trade groups.

“Local governments are recognizing what the state hasn’t yet – that our legal cannabis industry is in crisis and immediate tax relief is essential,” Amy O’Gorman Jenkins, executive director of California Cannabis Operators Association, said in a statement to MJBizDaily.

“When Sonoma County sees licensed cultivators plummet from 155 to just 66 in less than two years, that’s not market consolidation, it’s market collapse.

“These tax reductions represent a critical lifeline for the remaining businesses fighting to survive.”

Cannabis industry rally in Los Angeles

The two tax cuts follow Humboldt County supervisors for hundreds of marijuana farmers to pay off cultivation taxes enacted years ago.

The tax relief also comes as California is set to increase excise taxes from 15% to 19% on July 1, prompting industry pleas for more support and statewide protests.

The Black Los Angeles Cannabis Council, for example, held a rally at Los Angeles City Hall on Wednesday to highlight the deep financial and operational challenges most marijuana operators face in the largest regulated local market in the world.

Speakers, who included politicians, social equity license holders, store owners and other advocates, called for lowering taxes and enforcing shutdowns of unlicensed retailers.

At the rally, Elliot Lewis, the brash CEO of Southern California-based retail chain Catalyst Cannabis Co., vowed to halt L.A. tax payments altogether in a profanity-laced tirade.

“Starting today, we will no longer pay the City of Los Angeles any taxes in an act of civil disobedience,” he asserted.

Catalyst, based in Long Beach, operates six stores in L.A. and 31 statewide, among the most of any retail chain.

While the city’s Department of Cannabis Control (DCR) confirmed it has no oversight on tax collection, it warned that interest and other penalties will be assessed for nonpayment.

“The City regularly seeks and obtains tax judgements against those who do not meet their tax obligations,” DCR spokesperson Jen Marroquin told MJBizDaily via email.

“Our City Code does state that a licensee must remain in good standing with the city. It is not advisable to stop paying your taxes.”

Chris Casacchia can be reached at chris.casacchia@mjbizdaily.com.