Central Coast Commercial Cannabis Taxes That Passed the Ballot
Cannabis has slowly become a Central Coast commodity. Cities across its varying counties have long approved commercial businesses. In the November 2018 midterm, even more councils have joined the ranks with approved measures for cannabis taxations.
Like our previous post North Bay Commercial Cannabis Taxes that Passed the Ballot, Golden State digs into the new cannabis business taxations that will further develop the industry’s infrastructure on the Central Coast.
San Luis Obispo (SLO) County: No Change
In June of 2018, SLO voters approved Measure B-18, which issued a monthly tax to all cannabis businesses outside of laboratory testing. The measure allows tax rates up to 10% with an initial rate of 4%. Deliveries operating within the county are also subject to the 4% tax.
This rate will increase annually, and will be at 6% by July 1st, 2020, though the county maintains the right to vary taxes for different types of cannabis businesses. The taxes go to the county’s general fund, and cannot surpass the 10% without another vote.
City of San Luis Obispo (SLO): Measure F-18
The city of SLO issued Measure F-18 in response to the prior Ordinance, No. 1647, which stated that cannabis businesses would only be permitted after the city created an official tax. This win officially means that the city can begin to permit commercial cannabis operations.
The current measure poses that distributors, manufacturers, and testing labs would be taxed on gross receipts at a maximum rate ranging between 2.5-4%. Retailers would face a tax no higher than 10% of gross receipts on sales. The tax on cultivators would be maximized at $10 per square foot. Initial rates below the highest range level will begin on January 1st, 2019. The cultivation rate will last until 2021, and other business types could have taxes raised as authorized by the city council as long as they stay beneath the maximum percentage.
Paso Robles: Measure I-18
All cannabis-related businesses operating within city limits will now be taxed according to the Ordinance added to chapter 3.22 of the Paso Robles Municipal Code. For cultivation sites, the tax will be no more than $20 per square foot.
Cannabis retailers will be taxed up to 10% of their gross receipts. Cannabis transportation will also be taxed up to 10%. For any type of manufacturing, testing, or distribution, the tax on gross receipts will be limited to 15%.
Morro Bay: Measure D-18
Chapter 3.70 will be added to the Morro Bay Municipal Code to tax any cannabis businesses that work in the city. For cultivators, this tax will operate within a $25 limit as determined by the city council. Any other commercial cannabis sales will be taxed up to 10%.
All earnings from these taxes will be placed in the city’s General Fund, to be used for various needs as decided by the city council.
Atascadero: Measure E-18
Currently, Atascadero does not allow any commercial cannabis businesses, outside of delivery, to operate within city limits. However, the council and voters have recognized that this very well may change. Measure E-18 states that any current illegal or future approved cannabis operations will be taxed. These funds will all go toward improvements for various services, such as police force, code safety, and the fire department.
Cannabis retailers will be taxed up to 10% of gross receipts. Any other cannabis business outside of cultivation, such as distribution, manufacturing, or transportation, will be taxed up to 6%. For cultivators, the tax will not surpass $10.00 per square foot.
Santa Barbara County: No Change
Businesses in the unincorporated jurisdiction of Santa Barbara County still adhere to the taxes passed through Measure T in June of 2018. The tax rates vary from business to business. Currently, the rates stand as 6% of gross receipts for cannabis dispensaries and microbusinesses, 4% for cultivators,3% on manufacturers, and 1% for distributors and nurseries.
There is no end date in place for these taxes, and all funding will go toward “general government purposes” such as county healthcare, parks, and law enforcement.
Solvang: Measure F2018
The new approved tax rate, Measure F2018, installs an initial 5% and maximum 10% on gross receipts. The Ordinance allows the Solvang city council to increase or decrease the tax up to 1% so long as the range never exceeds the 10% limit.
Currently, Solvang only allows medical cannabis retailers and deliveries to operate within city boundaries. All retailers are limited to locations within the general commercial zone.
Goleta: Measure Z2018
Measure Z2018’s tax rates vary from business type. The cap for each cannot surpass 10%. The initial rates for these various commercial cannabis businesses are as follows: all retail and wholesale must adhere to a 5% tax; cultivators will pay a 4% tax; manufacturers will be charged a 2% tax; and cannabis distributors and nurseries will be rated at 1%.
These payments will be unrestricted for city use as determined by the Goleta City Council.
Lompoc: Measure D2018
Uncertainty and concern surrounded the development of Measure D2018. Various industry members felt it posed rates too high for their businesses, while council members stated the percentages were necessary. Eventually, the city determined higher taxes were necessary to fulfill gaps in the city’s service budget.
There will be no tax on testing facilities. Nonmedical retailers will be charged a rate of up to 6% on gross receipts. All cultivators, including nurseries, will pay a 1% rate. For manufacturers and distributors, the tax will culminate in a flat $15,000 payment for any net income falling below two million dollars. For income that exceeds two million, manufacturers and distributors will pay a flat $30,000 rate.
Monterey County: No Change
In November of 2016, voters approved Measure Y, a tax on commercial cannabis operations that would not affect personal cultivation for medical use. The maximum limit per square foot for cultivators is a $25 rate, with a $5 maximum for nurseries. The initial rate for cultivators (outside of nurseries) was $15. The initial rate for nurseries was $2 per square foot.
Other commercial cannabis businesses are charged at a rate that cannot surpass 10% of gross receipts. Currently, that rate is 5%. It will increase by 2.5% in the year 2020.
Marina: Measure V
Measure V is a double header. This Ordinance allows the City of Marina to both allow cannabis business activity and establish business license taxes for those businesses at a quarterly fee schedule.
All tax rates cannot exceed 5% of the businesses gross receipts. Retailers have a 2.5% minimum rate and other cannabis operants have a 2% minimum.
Where To Go From Here?
Like with the North Bay, the cannabis industry is continuing to build a foundation that will positively impact its businesses and surrounding economies. As new ordinances come into effect, they will undoubtedly invite others to recognize the new possibilities so that they may involve themselves in the path forward.