County Supervisors will ask voters in June to approve new taxes on marijuana sales in San Luis Obispo County, part of an evolving policy on the evil weed, which was legalized for adult use with the November 2016 election.
County Auditor-Controller-Treasurer-Tax Collector, Jim Erb, was primarily responsible for coming up with the tax proposal, which Supervisors approved March 6, and by law voters have to approve.
The measure would place a 4-percent local tax “on the gross receipts of all cannabis-related businesses operating in the unincorporated areas of San Luis Obispo County,” Erb said. “The tax measure would not change cannabis laws in the seven incorporated cities, which have jurisdiction over their own regulations regarding cannabis.”
The proposed tax would increase in 2-percent increments every year topping out at 10% by July 2020, unless the Board votes to maintain or lower the current rate, Erb added. The proposed tax is on top of the State’s 15-percent tax on cannabis-related businesses.
So if it does pass, total taxes on local pot businesses would total 25%.
“The tax on cannabis businesses is intended to offset the impacts of legalized cannabis in our county,” Erb said “We anticipate that there will be increased demand for code enforcement, law enforcement, health care, and education. Without this cannabis tax, these increased needs would have an impact on the County’s General Fund, which is needed to operate other vital county services.”
Oddly enough though, Supervisors, when they approved the land use regulations on marijuana, banned all storefront dispensaries in the unincorporated towns, which would seem to be the place where tax monies could most be generated.
They did however, allow permitted pot farms operating within the State Laws and County Ordinances, but approved allowing mobile dispensaries under strict guidelines. See: www.slocounty.ca.gov/planning/Cannabis-Cultivation.htm to read the land use ordinance.
Asked to explain, Erb said, “People can have cannabis delivered to their home, which would be considered a retail sale. There are specific rules that must be followed for mobile dispensaries, rules developed by the State, such as how much cannabis they can have in the vehicle and how much cash at any given time. I believe the amount they can carry is a value of $3,000 or $5,000.”
The tax situation is a little tricky, as the charges are not exactly a “sales tax” per se and growers aren’t wholesalers. “Sales from the mobile dispensaries would be subject to the cannabis business tax,” Erb said. “Additionally, the only thing a wholesaler avoids, or defers, is sales tax. The tax proposed by the ballot measure is considered a ‘gross receipts tax,’ it is not a sales tax.”
If pot is to be considered an agricultural commodity, might we see pot booths spring up at Farmer’s Markets? “They cannot set up a booth at a farmer’s market to sell cannabis,” Erb said. “They may be able to have a booth providing information about their products and how to buy it, I had not thought about that one.”
What sort of expenses does the County foresee that justify this tax? “For example,” Erb said, “most likely Public Health will have to provide information to local schools and clients about the short-term and long-term effects of cannabis. Many departments will be impacted, and all have diverse types of functions.
“More examples, the Sheriff will respond to crimes related to cannabis; the D.A. may be prosecuting crimes related to cannabis; environmental health may clean up legal and illegal sites who were using unauthorized chemicals; the Agricultural Commissioner will be dealing with insecticides and pesticides; Weights and Measures calibrating equipment used for testing and weighing of cannabis. We may see increases in homelessness and Veterans Services, Drug and Alcohol Services clients may increase, and we may see more DUI’s related only to cannabis.”
Because of the wide spread expected impacts to the County, the pot tax skirts past the Proposition 218 test of whether it is a general tax or a specialty tax. Specialty taxes need two-thirds approval, while general use taxes just a simple majority. But times change and the County will be able to change this law along with it.
“What we believe will be impacts today,” Erb said, “may not be the same as what it will be in 5 or 10-years from now. Because it is a general tax it becomes part of the discretionary revenue the County receives. If the tax is more than the consequences of legalized adult recreational use of cannabis, the tax revenue can be used for other programs, such as homelessness.”
But he doesn’t think that will be the case. “However, from what we have heard from Washington (State) and Colorado, the impact on the general fund outweighs the tax revenue. Without a revenue source to deal with problems created by the legalization of adult recreational use of cannabis other County programs will suffer, which I believe is not right.”
He believes future Boards of Supervisors will revisit the land use portion of the pot ordinance. “The land use ordinance was designed as what was believed to be in the best interest for our County and was approved by the majority of the Board of Supervisors,” Erb said of the 3-2 vote. “I do not think the land use ordinance will ever be changed just to generate tax revenue, any change would have to be the right thing to do for County residents.”
So how’s it going with regards to potential Mary Jane start-ups?
“So far, we have had about six people begin the minor use permit process with our Planning Department,” Erb said in mid-February. “Once they complete all the steps, the last stop will be my office for a business license.
“The entire process is costly and time consuming, the saving grace is when they finally get to my office, and all the prior steps have been completed, the initial charge for a business license will be $39 with a $30 annual renewal, plus we can issue a license the same day.”
If readers would like to read the County’s pot ordinance, it’s been posted online at: www.slocounty.ca.gov/Departments/Planning-Building/Active-Major-Projects/Cannabis-Land-Use-Ordinance/Current-County-Cannabis-Regulations.aspx.
All County voters will get to vote on the County’s pot tax measure in June, though it will only apply to the unincorporated areas, and voters can expect to get information on the tax ordinance as the June 5 Primary Election nears.
By Neil Farrell