Los Angeles Raises Cannabis Tax Rates Keeping the Illicit Market Alive and Well in California
Voters in Los Angeles County voted overwhelmingly in favor of a measure that, will charge business taxes to cannabis operations operating in unincorporated regions, after such firms are allowed to operate. Cannabis businesses operating in unincorporated regions must abide by county laws, which are currently being developed. The Board of Supervisors will likely consider an ordinance next year.
Voters adopted Measure C earlier this month, setting a tax schedule for these enterprises once they are eventually allowed, in the interim. The proposal established a number of initial tax rates, including $4 per square foot for cultivation under mixed lighting and $7 per square foot for cultivation indoors. The rates were set at 4% for retail gross receipts and 3% for production and distribution.
Initially, the levies are expected to raise $10.36 million annually, according to county staff. The ordinance specifies future fee increases after those first hikes, which will take effect on July 1, 2026.
The initial plan will probably permit up to 25 shopfront retail cannabis companies county-wide, 25 delivery retail stores, 10 establishments for indoor/mixed-light cultivation, 10 establishments for production, 10 establishments for delivery, and 10 establishments for testing laboratories, according to county staff, even though guidelines for marijuana operational processes in rural areas are currently being developed.
Each of the five supervisory districts is expected to have an equal distribution of businesses.
THE EFFECT ON THE OUTDOOR GROWS AND RURAL AREAS
In August, Supervisor Kathryn Barger claimed the tax measure did not portend an increase in outdoor grows. Her district encompasses the rural northern parts of the county that are hubs of illegal marijuana operations.
According to the strategy we’ve chosen, cannabis will only be allowed to be grown indoors, and not outdoors in greenhouses, as Supervisor Kathryn Barger stated at a recent board meeting. This will ensure that legal cannabis enterprises are distributed fairly throughout each supervisorial district.
Unambiguously, our board must state that we will not put up with illegal cannabis businesses. Illegal growers sabotage our efforts to establish a controlled and ethical cannabis sector, frequently at the cost of the rural people I represent. I will gather all resources available to strengthen enforcement and deterrence measures because I’m strongly committed to respecting the law, she stated.
WHAT MEASURE C IS ABOUT
California legalized adult use and possession of marijuana for recreational purposes in 2016, but local governments in the state are free to choose whether and how to impose taxes on marijuana sales that take place within their borders.
The endeavor to decide so is Measure C, proposed by L.A. County. In the unincorporated parts of Los Angeles County, the proposed ballot item asks voters to approve a tax on cannabis firms, including those engaged in the production, distribution, and sale of the drug. The County’s overall objective is to control the cannabis market in unincorporated regions, and approving the tax is a key component of that effort.
Cannabis sales in Los Angeles County would not be permitted under Measure C. It would still need to be put to a vote by the Board of Supervisors, who have stated they intend to do so in 2023.
For the Los Angeles County General Fund and a marijuana equity program, which would grant equal chances for people to enter the cannabis sector, the County projects a total taxable income of $10.4 million.
Los Angeles County Cannabis Business Tax Measure
The ballot summary for this measure was:
The measure enacts a tax on cannabis businesses in unincorporated areas of Los Angeles County at annual rates not to exceed $10 per square foot for cultivation (adjusted for inflation) and a percentage of gross receipts for different cannabis businesses, including retail (6%), testing laboratories (2%); distribution (3%) and for manufacturing, and for all other cannabis businesses (4%); will generate between approximately $10,360,000 and $15,170,000 annually.
SIMILAR CANNABIS TAX MEASURE IN OTHER COUNTY
Taxing legislation for cannabis businesses was approved by San Diego County Supervisors in June; it must still be approved by voters. Measure A is now on the ballot in November thanks to the actions.
At the board meeting on June 15, San Diego County Supervisor Nathan Fletcher stated, they are at another step in our progress towards establishing the safe, controlled, and legalized marijuana market in the unincorporated areas and he thinks this is a good endeavor.
Jim Desmond, the county supervisor, questioned why just the rural county would be subject to the marijuana business tax and why voters would have to decide on the issue on a countywide basis. According to county personnel, it is illegal to act otherwise because it is California law.
The argument put up by supporters is that towns like San Diego, Lemon Grove, La Mesa, Oceanside, and Vista already have cannabis business regulations. Measure A would generate additional funds to shut illegal cannabis operations while covering increased regulatory costs.
Measure A’s proponents contend that it is a nonpartisan approach to developing a secure, controlled, and lawful adult cannabis market in San Diego County and that it maintains tax money in the region. It taxes the businesses rather than the people who use cannabis, according to supporters. As a result, there won’t be a double tax because the tax won’t apply to cannabis businesses in incorporated cities. Supporters added that the tax is necessary to close down the illegal cannabis businesses that have plagued several areas of the county.
The cannabis company tax’s detractors argued that it was unjust since it only applied to businesses operating in the county’s unincorporated areas, despite the fact that all county residents would be able to vote on the issue. Aside from doubting whether tax revenues will genuinely fund services in the tax-paying areas, the official rebuttal is also dubious of claims of social equality.
The cannabis tax (Measure C) approval by Los Angeles County, is a step that was taken in an attempt to control the illegal grows in the county, by curbing outdoor production and regulating indoor or mixed-light grows.