- Posted by Ryan Reaves
- On October 15, 2017
- adelanto, adult use, California, cannabis, Commercial, cultivation, manufacturing, MAUCRSA, Medical, oakland, Sonoma, tax, taxes
BCC Announces Registration for Cannabis Tax Permits to Open in November
Provided below is a helpful graph which breaks down the movement of collected taxes from commercial cannabis businesses. The cultivation and excise taxes will be collected by distributors from cultivators and retailers to be paid to the California Department of Tax and Fee Administration. The required state taxes are in addition to any local taxes imposed by incorporated cities and counties.
Information provided by the Bureau of Cannabis Control 10/2/2017.
Section 34011 of the California Revenue and Taxation Code
Part 14.5 Sec. 163. “Cannabis Tax”. Senate Bill No. 94-2017.
Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA).
Examples of Local Taxes
The taxation of cannabis activities by the state is made more complex by the addition of taxes and fees at the local level. Local governments have ultimate say over regulations within their authority. Many cities and counties that are not banning commercial cannabis activities outright are imposing their own taxes to produce revenue. The ability to impose additional taxes is likely the motivating factor for many local governments planning to move forward with regulations. Time and research are still necessary to better understand the price elasticity of cannabis and how fluctuating tax rates throughout the state will affect the overall average price per pound of cannabis. To get a sense of local tax policies in California we will briefly explore regulations in Adelanto, Oakland, and Sonoma County.
Adelanto in San Bernardino County has been steadily revamping and amending local regulations pertaining to commercial cannabis activities to better support the growth of the industry in the region. Adelanto currently requires that all licensed commercial cannabis activities pay a monthly excise tax which on November 8, 2016 was set at 5% of gross receipts. The city council in Adelanto may change the excise tax rate or establish different rates for different types of commercial cannabis activities capped at the maximum voter approved rate of five percent.
A unique feature of Adelanto’s municipal code pertaining to cannabis taxation is the creation of the “voluntary contribution alternative”. Local permitted cultivators in Adelanto can voluntarily elect to pay an annual contribution based on a dollar amount per square foot of their cultivation facility rather than pay the monthly excise tax. The going rate for the contribution alternative is $5 per square foot paid once a year.
Oakland in Alameda County has long been known as a pro-cannabis city. Oakland’s local cannabis tax requirements are also tied to gross receipts but, have different rates for “medical” and “non-medical” cannabis businesses. As state licenses become available this distinction will be reflected in the type of license cannabis businesses apply for. MAUCRSA specifies that license types for cultivation, manufacturing, and retail can either be M-Type medicinal or A-Type adult-use.
Medical cannabis businesses in Oakland will be taxed at $50 for each $1,000 of gross receipts or 5%. Non-medical cannabis businesses, or commercial adult use businesses, will be taxed at $100 for each $1,000 of gross receipts or 10%. Oakland’s municipal code does not currently differentiate tax rates for different types of cannabis businesses beyond the medicinal and adult-use distinction.
Sonoma County has one of the most accessible and user-friendly cannabis programs to emerge from a California county government. An area known for its world-class vineyards and wine is embracing cannabis as an artisan agricultural product. Everything you need to know involving local regulations, permits, fees, and taxes can be found easily at the Sonoma County Cannabis Program website.
The existing local tax rates in Sonoma County came into effect on July 1, 2017. Outdoor, Indoor, and Mixed-Light cultivation are taxed by license type at a rate per square footage. Taxes for businesses involved in cannabis manufacturing and retail sales will be based on gross receipts. Manufacturers are taxed at 3.0% and dispensaries are taxed at 2.0%. Transporters, distributors, nurseries, and testing laboratories are effectively free from county taxes with a listed tax rate of 0.0%.
Below is a table breaking down the rate per square foot tax by license type on cultivation as listed on the Sonoma County Cannabis Program website.
Ryan Reaves is a Public Policy Analyst for CannaBusiness Law and Master of Public Policy candidate at Mills College in Oakland, California.
Featured Image by: Makenna Rae Photography