The “City by the Bay” may soon enact a local tax on recreational cannabis, if voters approve it this November. San Francisco Supervisor Malia Cohen introduced legislation on June 5 that would impose a local tax on cannabis gross receipts. But many local cannabis business owners say that state taxes are already too high, and that more taxes could push consumers to the black market.
Other attempts to enact high local taxes on cannabis businesses in the area have resulted in backtracking. Across the bay, Berkeley city officials recently slashed the city’s cannabis sales tax from 10 percent to five percent. Creating reasonable taxes is key to staying competitive with the black market.
Cohen stated that she doesn’t want the tax to be “overburdensome” on cannabis businesses. She also said that legal businesses need to stay competitive with the black market.
The Business and Tax Regulations Code would be amended by adding Article 30, consisting of Sections 3001 through 3014. The taxes would begin to be imposed in 2020. The bill would levy a two percent tax on cannabis gross receipts and would take effect on Jan. 1, 2020. In subsequent years, it would impose a 2.5 percent tax on retail cannabis sales, up to $1 million. It would also impose a two percent tax on non-retail cannabis businesses on gross receipts up to $1 million and a three percent tax on gross receipts in excess of $1 million.
The first $500,000 in gross receipts would be tax-exempt. Medical cannabis also would not be subject to the tax. Cohen feels that giving businesses until 2020 to prepare for a local tax would be enough time.
“We are still working on the details for the local cannabis tax and will be [revisiting the issue] shortly to follow-up.”
The proposed ordinance amending San Francisco’s Business and Tax Regulations Code would “impose an additional gross receipts tax, starting Jan. 1, 2020, on gross receipts from cannabis business activities, but exempting the first $500,000 of gross receipts and exempting retail sales of medicinal cannabis; said tax for 2020 to be set at a rate of 2 percent, which will increase in 2021 to between 2 percent and 5 percent depending on the type of cannabis business activity and amount of gross receipts, and which may be adjusted at any time within a range of 0 percent to 10 percent by ordinance adopted by a two-thirds vote of the Board of Supervisors; and increasing the city’s appropriations limit by the amount collected under the new tax for four years from November 6, 2018,” the bill reads.
The proposal is, however, still in the early stages. “We are still working on the details for the local cannabis tax and will be [revisiting the issue] shortly to follow-up,” Legislative Aide Aliya Chisti told CULTURE. City Supervisor Malia Cohen confirmed her new legislation to CULTURE, but did not provide any further comment.
It’s likely that local businesses will voice their opinion and provide input before the bill moves forward. The Board of Supervisors’ Budget and Finance Committee is expected to hold a hearing on the proposal on July 12. The local tax proposal could make it on to the November ballot, which is already shaping up to be a busy month at the ballot boxes.